Digital Brands Group, Inc. (DBGI) Published: 2022-11-07

Digital Brands Group, Inc. (DBGI)

This company is a clothing retailer based in Austin, TX. Formerly known as Denim.LA, Inc., the Company changed its name to Digital Brands Group, Inc. effective 2020-12-31.
Their business model is somewhat unique in that it is direct-to-consumer. Their brands include Bailey44, DSTLD, Harper+Jones, and STATESIDE.

Warning

This company is trending this morning on Shortable Stocks, which brought it to my attention. Please be aware that any company that has the following warning attached to its SEC filings is in trouble.

"The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has not generated profits since inception, has sustained net losses of $17,366,866 and $13,721,433 for the six months ended June 30, 2022 and 2021, respectively, and has incurred negative cash flows from operations during these periods. The Company has historically lacked liquidity to satisfy obligations as they come due and as of June 30, 2022, and the Company had a working capital deficit of $38,353,227. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company requires significant capital to fund operations and meet its obligations as demands are made. The Company expects to continue to generate operating losses for the foreseeable future. The accompanying consolidated financial statements do not include any adjustments as a result of this uncertainty."

This is a going concern qualification issued by the company's auditors. Read more about the importance of this here.

Financials

The company continues to lose money. Their sales did increase from 2020 to 2021, but their SG&A expenses surged. Their balance sheet doesn't look much better. As of 2022-06-30 it looks like this:

Part of Digital Brands Group's Balance Sheet
 

They don't have much cash on hand. Their current ratio (total current assets / total current liabilities) is 0.13. This is an unhealthy company.

Stock Chart

This is a log chart showing DBGI since its IPO.


The stock price peak was $880/share, but don't let that fool you. They effected a 1:100 reverse stock split on 2022-11-04.  So the all-time high before that was $8.80 and the all-time low was $0.0604. Nuts.
This stock split was all about maintaining their NASDAQ listing.

Conclusion

This article is short as I've just about seen enough. I wouldn't touch this stock with a 10-foot pole. Of course, there will be volatility as this stock settles into its new reality with fewer than 1 million outstanding shares. And you might even be able to guess when it goes up.
But I strongly suspect that the downward trend will continue unless something meaningful changes with the company's sales prospects.





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This article was written by: Anonymous
  • The author does not have a financial interest (stocks, options, other) in any companies mentioned in this article.
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