Creator Brand Portfolio And Asset Light Model Will Transform Long Term Earnings Power

Catalysts

About Xcel Brands

Xcel Brands is a media and consumer products company that builds and manages creator led and licensed fashion, home, beauty and food brands sold across TV shopping, digital and traditional retail.

What are the underlying business or industry changes driving this perspective?

• The alliance with United Trademark Group and the recent US$2.6 million equity raise give Xcel additional working capital to launch multiple new creator brands through 2026. This can support future revenue and licensing income as more properties go to market.
• The push to build a brand portfolio that reaches 100 million social media followers, already up from 5 million to 43 million this year, increases exposure to influencer led commerce. This can support higher royalties, higher margin digital sales and improved earnings power as scale builds.
• New creator brands with Cesar Millan, Gemma Stafford, Jenny Martinez and Coco Rocha expand Xcel into categories such as food, pets, home and beauty that are seeing strong online and TV engagement. This can diversify revenue streams and support more resilient net margins over time.
• The asset light model, with production handled by licensees and partners across QVC, HSN, JTV and other channels, is now supported by a reduced annual operating cost run rate of about US$9 million. This can improve operating leverage and help any incremental revenue translate more directly into adjusted EBITDA and earnings.
• The Longaberger launch on QVC, faster than expected launches for Gemma Stafford and Jenny Martinez food lines using domestic sourcing, and a pipeline of additional influencers position Xcel to benefit from growing creator commerce and home shopping audiences. This can support future top line growth and potentially higher net margins as the portfolio matures.

Assumptions

This narrative explores a more optimistic perspective on Xcel Brands compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• The bullish analysts are assuming Xcel Brands's revenue will grow by 16.9% annually over the next 3 years.
• The bullish analysts are not forecasting that Xcel Brands will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Xcel Brands's profit margin will increase from -437.1% to the average US Specialty Retail industry of 4.9% in 3 years.
• If Xcel Brands's profit margin were to converge on the industry average, you could expect earnings to reach $389.1 thousand (and earnings per share of $0.07) by about January 2029, up from $-21.8 million today.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 150.9x on those 2029 earnings, up from -0.3x today. This future PE is greater than the current PE for the US Specialty Retail industry at 20.9x.
• The bullish analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 12.5%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Xcel Brands is still running at a loss, with a net loss of approximately US$4 million for the quarter and US$6.8 million for the first 6 months of 2025. If new creator brands take longer than expected to gain traction, the company may not generate enough additional revenue to move toward profitability.
• Total revenue for the current quarter was US$1.3 million compared with US$3 million in the same quarter last year, largely tied to the sale of the Lori Goldstein brand. If replacement brands fail to scale to similar levels, the smaller revenue base could limit operating leverage and weigh on net margins and earnings.
• Interest and finance expenses increased to US$2.3 million for the quarter and US$2.9 million year to date, mainly due to higher debt balances and a loss on early extinguishment of debt. Even with paid in kind interest, higher future cash interest obligations could pressure future earnings and constrain cash available for growth.
• Management highlighted caution around tariffs affecting QVC, HSN and key licensees such as G III for the Halston brand. Prolonged tariff or sourcing pressures could hurt sell through, reduce royalty income and put downward pressure on both revenue and net margins across the portfolio.
• The business is heavily tied to a small number of partners and licensees, as shown by disruption from a change in the wholesale licensee for C. Wonder and Christie Brinkley. If similar licensing or partner issues recur, or if planned initiatives like ORME face funding delays, the company could see uneven revenue, weaker earnings and less predictable cash flows.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for Xcel Brands is $7.0, which represents up to two standard deviations above the consensus price target of $5.0. This valuation is based on what can be assumed as the expectations of Xcel Brands's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $7.0, and the most bearish reporting a price target of just $3.0.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2029, revenues will be $8.0 million, earnings will come to $389.1 thousand, and it would be trading on a PE ratio of 150.9x, assuming you use a discount rate of 12.5%.
  
• Given the current share price of $1.25, the analyst price target of $7.0 is 82.1% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.