FIGS, Inc. Earnings Call: Mixed Outlook and Strategic Shifts

FIGS, Inc. ((FIGS)) has held its Q4 earnings call. Read on for the main highlights of the call.

The recent earnings call for FIGS, Inc. presented a mixed outlook, highlighting both significant achievements and ongoing challenges. The company reported notable international growth and maintained a strong cash position, yet faced difficulties in customer acquisition and experienced pressure on gross margins. A strategic shift in promotional strategies is anticipated to impact near-term revenue negatively, but it is aimed at ensuring long-term brand health. Overall, the sentiment during the call was one of cautious optimism, with a focus on strategic adjustments for future growth.

Record Net Revenue Achievement

FIGS, Inc. announced a record net revenue of $555.6 million for the fiscal year 2024, marking a 2% increase year-over-year. This achievement underscores the company’s ability to maintain growth despite market challenges.

International Business Growth

The international segment of FIGS, Inc. saw impressive growth, with a 45% increase for the quarter. This growth now represents 16% of the company’s net revenues, marking an all-time high for the brand and highlighting the potential of international markets.

Strong Cash Position

The company concluded the year with over $245 million in net cash and investments, bolstered by a positive operating cash flow of approximately $81 million. This strong cash position provides a solid foundation for future investments and strategic initiatives.

Scrubwear and Non-Scrubwear Growth

FIGS, Inc. reported positive growth in scrubwear for the third consecutive quarter, alongside a strong rebound in non-scrubwear sales following a previous downturn. This indicates a broadening of the company’s product appeal.

Customer Acquisition Challenges

Challenges in customer acquisition were noted, with an increased rate of customers falling out of the active base. However, there was a positive trend of lapsed customers returning, suggesting potential for re-engagement strategies.

Gross Margin Pressure

The company experienced a contraction in gross margins due to shifts in product mix, with a full-year contraction of 150 basis points to 67.6%. This highlights the need for careful management of product offerings and pricing strategies.

Promotional Strategy Impact

A strategic decision to reduce site-wide promotions is expected to negatively impact top-line performance in 2025. This move is part of a broader strategy to enhance long-term brand health and reduce reliance on promotions.

Lower Active Customer Growth

Active customer growth was modest, with a year-over-year increase of only 3%. Additionally, net revenues per active customer decreased by 1%, indicating challenges in maximizing customer value.

Forward-Looking Guidance

Looking ahead to fiscal 2025, FIGS, Inc. provided guidance focusing on prioritizing and rebasing efforts while investing in growth opportunities. The company anticipates a low single-digit decline in net revenues, influenced by a reduction in promotional activities. Gross margins are expected to remain flat at approximately 67.6%, with adjusted EBITDA margins projected between 9% and 9.5%. The company plans to enhance brand awareness, customer engagement, and capitalize on international market growth, retail channels, and product innovations.

In summary, the earnings call for FIGS, Inc. reflected a sentiment of cautious optimism, with the company balancing significant achievements against ongoing challenges. Key takeaways include record net revenue, strong international growth, and a robust cash position, offset by customer acquisition difficulties and gross margin pressures. The strategic shift in promotional activities aims to fortify long-term brand health, with a focus on sustainable growth and innovation.