Two fashion brand houses are ringing in 2022 by adding to their growing portfolios.
American Exchange Group, a multi-division designer, manufacturer and wholesaler of fashion accessories, has agreed to acquire the assets of comfort footwear brand Aerosoles for an undisclosed sum.
And Digital Brands Group, Inc., a curated collection of luxury lifestyle, digital-first brands, will acquire global lifestyle apparel brand Sundry for $41.5 million, including $34 million in cash and promissory notes and $7.5 million in shares.
Aerosoles was already an existing partner of American Exchange Group, collaborating on the design, branding and strategy for a new collection dropping in Spring 2022. The moderately priced line will be available in select retailers nationwide, targeting the mass merchant and off-price channels.
As part of the acquisition, the two companies aim to expand Aerosoles‘ distribution channels and introduce the brand to new categories and audiences.
“This acquisition marks an exciting new chapter in the evolution of American Exchange Group. We look forward to supporting the future growth of this brand and are excited to welcome Aerosoles into our brand portfolio,” said Alen Mamrout, CEO of American Exchange Group.
American Exchange Group, which also operates 13 private brands including American Exchange, Brooklyn Brothers, Alexis Bendel, Jessica Carlyle, Olivia & Kate and Skull Squad, distributes and manufactures products across footwear, tech wearables, watches, jewelry, handbags and fashion accessories. The company has licensing agreements with brands including Dr. Seuss, DC Comics, Kendall + Kylie, Mudd, Rocawear, and XOXO among others.
“This partnership marks an exciting new chapter in the evolution of Aerosoles as we harmonize a modern, elevated core with broader commercial opportunities in distribution. We do so with a continued unwillingness to compromise on brand vision and quality control,” Aerosoles CEO Alison Bergen said of the initial partnership.
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Under Bergen, Aerosoles changed its distribution model and eliminated its brand-owned stores to focus on wholesale channels and its own website. Aerosoles is sold at retailers including Nordstrom, Macy’s, DSW, Zappos, Belk and aerosoles.com.
As for Digital Brands Group, the company is adding to an owned portfolio that already includes premium denim brand DSTLD, contemporary women’s designer brand Bailey 44, made-to-measure suiting seller Harper & Jones, elevated basics label Stateside and currently dormant luxury men’s wear brand ACE Studios.
Sundry is a women’s apparel brand inspired by ocean lifestyle, bringing a different dimension to DBGI’s stable of digitally native brands. Like Stateside, Sundry collections are designed and manufactured in Los Angeles.
Founded in 2011, Sundry offers collections of women’s clothing, including dresses, shirts, sweaters, skirts, shorts, athleisure bottoms and other accessories. Sundry’s “coastal casual” products consist of soft and colorful designs that the company describes as featuring “a distinct French chic, resembling the spirits of the French Mediterranean and the energy of Venice Beach in Southern California.”
As part of the acquisition, Sundry’s founders Matthieu Leblan and Joe Levy, and its senior leadership team, will remain with the company, headquartered in Los Angeles.
“In the short term, this acquisition is expected to immediately create significant scale in revenues and internal cash flow for marketing and talent growth,” Digital Brands Group CEO Hil Davis said in a statement. “In the long term, we believe this acquisition should drive more brand awareness and customer demand, which in turn should fuel our future growth across our platform, brands and customers.”
Sundry in 2021 generated $18.2 million in revenues in the first nine months against $13.2 million in the same period of 2020, an increase of 37.9 percent. And more important for DGBI, Sundry’s profitability improved as well, with $2.7 million in net income in the first nine months of 2021, up 11.7 percent from the year-ago period’s $2.4 million.
Davis believes Sundry should make DBGI more attractive and engaging for both current and potential customers. Since the company’s slate of brands all operate on a shared back-end system that leverages customer data and purchase history, Sundry could benefit by having a better curated, more personalized shopping experience.
“Regarding customer reach, we believe this acquisition should result in a significant acceleration in our customer base due to Sundry’s large direct-to-consumer list. We plan to leverage Sundry’s customer list to cross market with our other brands,” added Laura Dowling, DBGI’s chief marketing officer. “We believe this should create significant synergies between all our portfolio brands that results in significantly lower customer acquisition costs, higher customer retention, higher annual spend per customer and higher lifetime value per customer.”
DBGI, which went public in May last year, is building its portfolio through acquisitions. Dowling told Sourcing Journal last year that the company targets “small-and-medium-sized brands that have this intrinsic quality and a cult-like following” with the goal of owning more of the consumer’s “closet share.”
The firm has specific performance metrics that it follows when measuring potential acquisitions, seeking out labels that it believes it can grow to between $50 million and $150 million in revenue. Companies are also expected to reach a 50 percent contribution margin after fulfillment and shipping costs.
Earlier this month, DBGI revealed its fourth quarter revenue is expected to come in line with the company’s previous forecast of approximately $4 million, with sales slightly affected by global supply chain delays.
“The delays were due to some of our products stuck in transport, which were limited to our Bailey 44 brand,” the company said in its statement.
For the full year, DBGI’s net revenue is anticipated to increase 44 percent to $7.6 million, versus $5.2 million a year ago. However, the revenue figure does not include the entire net revenue from 2021 for Harper & Jones or Stateside, as the company acquired the brands during the period.
The transaction is expected to be completed late in the first half of 2022, subject to customary closing conditions and financing.