Digital Brands Group Reports 48% Revenue Decline and Increased Net Loss in Q1 2025

Digital Brands Group, Inc. reported a significant decline in financial performance for the first quarter of 2025, with net revenues of $1.87 million, down 48% from $3.58 million in the same period last year. The company also recorded a net loss of $2.09 million, compared to a loss of $683,735 in the prior year. This downturn is attributed to the loss of a major wholesale account, reduced digital advertising spend, and delays in wholesale shipments, which collectively impacted sales across its brand portfolio.

The company's operating expenses surged to $2.87 million, up from $1.95 million in the previous year, primarily due to increased general and administrative costs. The gross profit also fell to $872,455, reflecting a gross margin of 46.6%, slightly down from 48.1% in the prior year. The decrease in gross margin was linked to fixed costs associated with warehouse and distribution operations being spread over lower revenue totals. Despite these challenges, Digital Brands Group anticipates that gross margins will improve as revenues increase and the company leverages its fixed costs more effectively.

In terms of strategic developments, Digital Brands Group completed a securities offering in February 2025, raising approximately $7.5 million before expenses. This capital is expected to support ongoing operations and marketing efforts. The company also reported a working capital deficit of $8.15 million as of March 31, 2025, and plans to address its liquidity needs through potential equity offerings and debt financing. The company has initiated cost-cutting measures, including significant headcount reductions, which are projected to save an additional $700,000 over the next year.

Operationally, Digital Brands Group has been focusing on expanding its customer base through both online and traditional wholesale channels. The company has seen an increase in digital revenue of over 80% from the previous quarter, despite the overall decline in net revenues. The company is also working to enhance its product offerings and marketing strategies, including a new partnership with the University of Alabama to launch a collegiate apparel line.

Looking ahead, Digital Brands Group remains cautious about its financial outlook, emphasizing the need for continued revenue growth and effective cost management. The company is exploring various financing options to ensure it can meet its obligations and execute its business plans. However, it acknowledges that without securing additional funding, it may face challenges in sustaining operations and achieving its growth objectives.