8-K: FIGS Inc. Reports Q1 2025 Financial Results: Revenue Growth Exceeds Expectations Despite Tariff Concerns

FIGS Inc. announced its Q1 2025 financial results, showcasing a 4.7% increase in net revenues, driven by existing customer orders and higher average order value, while also updating its full-year outlook due to U.S. tariffs.

Summary

• FIGS, Inc. reported a 4.7% year-over-year increase in net revenues for Q1 2025, reaching $124.9 million.
• The growth was primarily driven by increased orders from existing customers and a higher average order value (AOV).
• Scrubwear net revenues increased by 4.9% to $99.6 million, while non-scrubwear net revenues rose by 3.8% to $25.3 million.
• U.S. net revenues grew by 2.9% to $106.0 million, and international net revenues increased significantly by 16.4% to $18.9 million.
• Gross margin decreased by 130 basis points to 67.6%, attributed to product mix shift and higher freight expenses.
• Operating expenses increased by 3.6% to $84.7 million, but decreased as a percentage of net revenues from 68.5% to 67.8%.
• Net loss was $(0.1) million, or ($0.00) in diluted earnings per share, compared to a net income of $1.4 million, or $0.01 in diluted earnings per share, in the same period last year.
• Adjusted EBITDA decreased by $4.0 million year-over-year to $9.0 million.
• Adjusted EBITDA margin was 7.2%, compared to 10.9% in the same period last year.
• Active customers increased by 3.8% year-over-year to 2.7 million as of March 31, 2025.
• Net revenues per active customer decreased by 1.0% year-over-year to $208.
• AOV increased by 2.6% year-over-year to $119.
• The company updated its full-year 2025 financial outlook, projecting net revenues to decline by low-single-digits compared to 2024 and an adjusted EBITDA margin of 7.5% to 8.5%.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While revenue growth and customer acquisition are positive, declining profitability and tariff concerns temper the outlook.

Positives

• Net revenues increased by 4.7% year-over-year, reaching $124.9 million.
• International net revenues experienced substantial growth, increasing by 16.4% year-over-year.
• The number of active customers increased by 3.8% year-over-year, reaching 2.7 million.
• Average order value (AOV) increased by 2.6% year-over-year, reaching $119.
• Operating expenses as a percentage of net revenues decreased from 68.5% to 67.8%.

Negatives

• Gross margin decreased by 130 basis points to 67.6%.
• Net income turned into a net loss of $(0.1) million, compared to a net income of $1.4 million in the same period last year.
• Adjusted EBITDA decreased by $4.0 million year-over-year.
• Adjusted EBITDA margin decreased from 10.9% to 7.2%.
• Net revenues per active customer decreased by 1.0% year-over-year.

Risks

• Changes in U.S. trade policies, particularly tariffs, are adding variability to the company's planning and outlook.
• The company faces growing economic uncertainty.
• The company's ability to maintain its historical growth rate is uncertain.
• The company's reliance on a limited number of third-party suppliers poses a risk.
• Fluctuations in raw material costs could impact profitability.

Future Outlook

The company anticipates net revenues to decline by low-single-digits compared to 2024 and an adjusted EBITDA margin of 7.5% to 8.5% for the full year 2025, reflecting the projected impact of current U.S. tariffs.

Management Comments

• Trina Spear, Chief Executive Officer and Co-Founder, stated that first quarter results were ahead of expectations, supported by customer growth, strong full-priced selling, record AOV, and a return to growth in the U.S.
• Sarah Oughtred, Chief Financial Officer, commented that changes in U.S. trade policies have added greater variability to the company's planning, particularly in the second half of the year.

Industry Context

FIGS operates in the competitive healthcare apparel market, facing competition from established players and emerging direct-to-consumer brands. The company's focus on innovation, community building, and a direct-to-consumer model positions it to capitalize on the growing demand for specialized and comfortable healthcare apparel.

Comparison to Industry Standards

• Comparable companies in the apparel industry, such as Lululemon and Nike, often report higher gross margins, typically in the 50-60% range, but FIGS' 67.6% gross margin still indicates a premium brand position.
• Direct-to-consumer brands like Warby Parker and Allbirds have demonstrated the potential for strong growth and customer loyalty, which FIGS aims to replicate in the healthcare apparel sector.
• FIGS' AOV of $119 is relatively high compared to general apparel retailers, reflecting the specialized nature and premium pricing of its products.

Stakeholder Impact

• Shareholders may be concerned about the decline in profitability and the impact of tariffs on future performance.
• Employees may be affected by potential changes in investment and operational strategies.
• Customers are expected to continue receiving high-quality products and services.
• Suppliers may be impacted by changes in sourcing and trade policies.

Next Steps

• FIGS management will host a conference call and webcast to discuss the company's financial and business results and outlook.
• The company will continue to evaluate a range of scenarios related to U.S. trade policies and their impact on the business.
• The company intends to accelerate investment to better support its opportunity.

Key Dates

Keywords

financial results, net revenues, EBITDA, healthcare apparel, FIGS, tariffs, AOV, active customers