Digital Brands Makes Major Strides: Here's What the $2.7M Annual Interest Savings Could Mean

Digital Brands (DBGI) just delivered some interesting numbers to shareholders that paint a picture of aggressive financial restructuring. Since May 2024, the company has wiped out $5.2M in convertible notes, debt, and aged payables—no small feat for a mid-cap player looking to right-size its balance sheet.

The real headline? Interest expense is about to get slashed dramatically. The company is projecting annual interest costs will plummet from $3.1M (fiscal 2024) to just $420,000 (fiscal 2025). That $2.7M swing translates directly to the bottom line and cash flow, which should provide some breathing room for future initiatives.

Tackling the Overhead Burden

What caught our attention is how Digital Brands is methodically working through a $42M overhang tied to goodwill amortization and interest expenses from past acquisitions. The good news: this drag gets cut to $2.5M over the next two years. CEO Hil Davis emphasized the strategic importance: “We have made significant progress in cleaning up our balance sheet, which should result in significantly lower interest expense and increased cash flow. With these items behind us, we are aiming to pursue marketing initiatives to improve our performance for our shareholders.”

What’s Next for the Stock?

With lighter debt servicing costs and fewer balance sheet anchors, the company is now positioned to redirect capital toward growth marketing. This timing matters—Digital Brands recently recorded 224% digital revenue growth and implemented a 1-for-50 reverse stock split as part of its restructuring strategy. The partnership with VAYNERCOMMERCE for TikTok expansion suggests management is betting on digital-first channels to drive future momentum.

Whether this financial cleanup translates into sustained stock performance remains to be seen, but the math here is straightforward: less interest expense and cleaner financials typically open doors for reinvestment in the business.