10-K: FIGS, Inc. Reports Strong 2025 Growth Amidst Tariff Headwinds

FIGS, Inc. reported a 13.6% increase in net revenues to $631.1 million for 2025, driven by customer growth and higher average order value, despite a decline in gross margin due to tariffs and inventory write-offs.

Summary

• Net revenues increased by 13.6% to $631.1 million in 2025, up from $555.6 million in 2024.
• Active customers grew by 9.4% to approximately 2.9 million as of December 31, 2025, from 2.7 million in 2024.
• Net income significantly increased to $34.3 million in 2025 from $2.7 million in 2024.
• Gross margin decreased by 1.1 percentage points to 66.5% in 2025, primarily due to tariffs (120 basis points impact) and inventory write-offs.
• Adjusted EBITDA increased to $74.5 million in 2025, up from $51.8 million in 2024, with an adjusted EBITDA margin of 11.8%.
• Operating expenses increased by $8.3 million, or 2.2%, but decreased as a percentage of net revenues by 6.7 percentage points due to leverage.
• The company recorded an inventory write-off of $5.6 million in Q4 2025 due to aged and obsolete inventory.
• A new 10% global tariff was imposed in February 2026, with an intention to raise it to 15%, following a Supreme Court ruling invalidating IEEPA-based tariffs.
• The company repurchased 567,607 shares of Class A common stock for approximately $2.7 million in 2025, with $52.0 million remaining in the repurchase program.
• The lease for the Santa Monica headquarters was amended, relocating to a larger space (39,260 sq ft from 26,118 sq ft) and extending the term.
• The credit agreement with Bank of America, N.A. was amended, extending the maturity date to November 3, 2030, and reducing the annual commitment fee.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this as a positive report, demonstrating strong revenue and net income growth, effective cost management, and customer expansion, despite ongoing tariff and supply chain challenges impacting gross margin.

Positives

• Strong net revenue growth of 13.6% year-over-year, reaching $631.1 million in 2025.
• Significant increase in net income from $2.7 million in 2024 to $34.3 million in 2025.
• Adjusted EBITDA increased to $74.5 million in 2025, up from $51.8 million in 2024, with an adjusted EBITDA margin of 11.8%.
• Active customer base expanded by 9.4% to 2.9 million, demonstrating continued brand appeal and customer acquisition.
• Net revenues per active customer increased to $216 in 2025 from $208 in 2024.
• Average order value (AOV) increased to $120 in 2025 from $113 in 2024.
• Operating expenses decreased by 6.7 percentage points as a percentage of net revenues, showing leverage on higher sales.
• Successful dismissal of the Class Action Securities Litigation, with the court entering judgment against the plaintiffs in February 2025.
• Extension of the revolving credit facility maturity date to November 3, 2030, and reduction of the annual commitment fee.
• Low return rate of approximately 10% from 2021 through 2025, significantly lower than the broader online apparel industry average of 30-40%.
• High employee engagement index score of 81% in early 2026, with 96% proud to work at FIGS and 92% aligned with mission and values.

Negatives

• Gross margin decreased by 1.1 percentage points to 66.5% in 2025, primarily due to tariffs and inventory write-offs.
• Tariffs negatively impacted gross margin by approximately 120 basis points in 2025.
• Inventory write-offs contributed to the gross margin decline, including a $5.6 million write-off in Q4 2025 for aged and obsolete inventory.
• Cash flows from operating activities decreased from $81.2 million in 2024 to $61.2 million in 2025.
• Free cash flow decreased from $64.1 million in 2024 to $53.0 million in 2025.
• Other income, net, decreased by 25.0% due to lower interest rates.
• The company estimates tariffs will negatively impact gross margin for 2026 by approximately 400 basis points without mitigation efforts.

Risks

• Historical growth may not be sustainable or indicative of future results, and failure to manage business expansion effectively could adversely affect financial condition.
• The company has not always been profitable and may not be profitable in the future, with expected increases in operating expenses.
• Success depends on maintaining brand value and reputation, which can be harmed by negative publicity or failure to meet customer expectations.
• Failure to attract new customers, retain existing customers, or increase sales to them would harm business and growth prospects.
• Unsuccessful marketing efforts could harm business, financial condition, and results of operations.
• Reliance on a strong community of engaged customers and ambassadors, including through social media, carries risks of negative publicity or failure to grow the network.
• Failure to successfully develop and introduce new, innovative, and updated products could impact sales and profitability.
• The healthcare apparel market is highly competitive, with established companies and new entrants, potentially leading to pricing pressures and reduced profit margins.
• Future success depends on retaining key employees and attracting highly skilled team members, with intense competition for talent.
• International business uncertainties, including cultural differences, regulatory environments, limited brand recognition, and geopolitical risks (e.g., Russia's invasion of Ukraine, Middle East conflict), could harm international operations.
• Shipping disruptions (e.g., Red Sea conflict, port-worker strikes, weather, labor shortages) and changes in shipping costs could adversely affect business.
• Problems with distribution centers' operational infrastructure (e.g., system failures, natural disasters, labor difficulties) could harm ability to meet customer expectations and manage inventory.
• Inability to accurately forecast customer demand, manage inventory, and plan for future expenses could lead to inefficient inventory, increased costs, write-offs, or shortages.
• Consumer confidence, shopping behavior, and spending may be negatively impacted by macroeconomic factors (e.g., inflation, high interest rates, recession fears, geopolitical tensions, healthcare workforce stress).
• Reliance on a limited number of third-party suppliers for materials and production could cause supply chain problems and additional risks, including disruptions from global conflict or pandemics.
• Global trade policy, including tariffs (e.g., new 10% global tariff, potential 15% increase, UFLPA), significantly impacts ability to source and distribute products profitably.
• Merchandise returns could harm the business if rates increase or return economics become less efficient.
• The fluctuating cost and availability of raw materials (e.g., synthetic fabric components, cotton, impact of Xinjiang region restrictions) could adversely affect cost of goods sold.
• Failure of suppliers/manufacturers to comply with product safety, labor, or ethical laws could damage reputation and business.
• Conducting business in China exposes the company to political, legal, and economic risks, including trade policy changes, increased labor costs, and intellectual property theft.
• Inability to execute on B2B growth strategy due to challenges like longer sales cycles, the need for strong relationships, and potential customer concentration.
• Inability to execute on retail growth strategy due to challenges in locating space, hiring talent, operational complexities, and potential theft/damage.
• Increases in labor costs (wages, benefits) could adversely affect business and profitability.
• System interruptions, cyberattacks, or other performance failures in IT infrastructure could damage business, reputation, and financial results.
• Failure to protect or enforce intellectual property rights could diminish brand value and competitive position.
• The inability to acquire, use, or maintain marks and domain names could substantially harm business, financial condition, and results of operations.
• Exposure to foreign currency exchange rate fluctuations could impact net revenues and results of operations.
• Any failure to comply with trade, anti-corruption, and other regulations could lead to investigations or actions by government regulators and negative publicity.
• Changes in tax laws (e.g., Inflation Reduction Act, OBBBA, Pillar Two, state NOL suspensions) may adversely impact financial position.
• The company could be required to collect additional sales taxes that may increase the costs customers would have to pay for products and adversely affect results of operations.
• The ability to use net operating loss carryforwards may be limited by Section 382 or state law suspensions.
• Quarterly results of operations have from time to time, and may in the future fluctuate, and if operating and financial performance in any given period does not meet guidance or expectations, the trading price of Class A common stock may decline.
• Sales, directly or indirectly, of a substantial amount of Class A common stock in the public markets by existing security holders may cause the price of Class A common stock to decline.
• The dual-class structure of common stock, voting agreement among the company and co-founders, and stockholders agreement among the company and Baron Capital Management, Inc. and BAMCO, Inc., may limit or preclude stockholders' ability to influence corporate matters.
• The company is a controlled company within the meaning of the rules of the New York Stock Exchange and, as a result, qualifies for, and from time to time relies on, exemptions from certain corporate governance requirements.
• If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about the business, the price of Class A common stock and trading volume could decline.
• The company does not currently intend to pay dividends for the foreseeable future.
• Delaware law and provisions in the amended and restated certificate of incorporation and amended and restated bylaws could make a merger, tender offer, or proxy contest more difficult, limit attempts by stockholders to replace or remove current management, and depress the market price of Class A common stock.
• The share repurchase program may not be fully consummated or enhance long-term stockholder value, could increase the volatility of the trading price of stock, and could diminish cash reserves.
• Estimates of market opportunity and forecasts of market growth may prove to be inaccurate, and even if the markets in which the company competes achieve the forecasted growth, the business could fail to grow at similar rates, or at all.
• Results of operations could be adversely affected by natural disasters, public health crises, political crises, or other catastrophic events.
• The company is subject to periodic disputes, claims, and litigation that could result in unexpected expenses and could ultimately be resolved against it.
• Insurance may not provide adequate coverage against claims.
• The company incurs significant costs as a result of being a public company, and management is required to devote substantial time to compliance with public company responsibilities and corporate governance practices.
• If estimates or judgments relating to critical accounting policies are based on assumptions that change or prove to be incorrect, results of operations could fall below expectations, resulting in a decline in the trading price of Class A common stock.
• Reported financial results may be negatively impacted by changes in GAAP.
• The company is obligated to maintain effective internal control over financial reporting and any failure to maintain effective internal controls may cause investors to lose confidence in the accuracy and completeness of reported financial information and the market price of Class A common stock may be negatively affected.
• Disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
• The company may require additional capital to support business growth, and this capital might not be available or may be available only by diluting existing stockholders.
• Failure to effectively and efficiently address environmental, sustainability, social, and governance matters could adversely impact the company.

Future Outlook

The company expects continued investment in brand and performance marketing to drive future growth. Tariffs are estimated to negatively impact gross margin for 2026 by approximately 400 basis points without mitigation efforts, and this estimate may change materially as conditions evolve. The company plans to open additional Community Hubs and operate additional fulfillment centers in the future. The company intends to continue making investments to support business growth and may require additional funds, potentially through equity or debt financings.

Management Comments

• "Our mission is to celebrate, empower and serve those who serve others."
• "We are committed to helping this growing, global community of professionals, whom we refer to as Awesome Humans, look, feel and perform at their best—24/7, 365 days a year."
• "We create technically advanced apparel and products that feature an unmatched combination of comfort, durability, function and style, all at an affordable price."
• "By elevating scrubs and creating premium products for healthcare professionals that support them on and off-shift, we revolutionized the large and fragmented healthcare apparel market, branded a previously unbranded industry and de-commoditized a previously commoditized product."
• "Most importantly, we built a community and lifestyle around a profession. As a result, we have become the industry’s category-defining healthcare apparel and lifestyle brand."
• "We believe that our performance and future success depend on a number of factors that present significant opportunities for us."
• "We believe measuring net revenues per active customer is important to understanding our engagement and retention of customers, and as such, our value proposition for our customer base."
• "While we believe our largely non-discretionary, replenishment-driven business model is resilient in challenging macroeconomic environments, adverse macroeconomic pressures have affected our results of operations and we expect them to continue to do so in the near term."

Industry Context

StockSavvy.ai notes that FIGS operates in a healthcare apparel industry projected for long-term growth, driven by an expanding aging population and increased focus on health. The company's direct-to-consumer model and focus on technical comfort and style continue to disrupt a historically commoditized market, differentiating it from legacy participants. The expansion of its Community Hubs and TEAMS business aligns with broader trends of specialized retail experiences and B2B solutions. However, the industry, like many others, faces macroeconomic headwinds such as inflation and supply chain disruptions, which are impacting costs and consumer spending.

Comparison to Industry Standards

• FIGS' return rate of approximately 10% from 2021 through 2025 is significantly lower than the broader online apparel industry return rates, which tend to be in the 30% to 40% range.
• The company's employee engagement index score of 81% in early 2026 is above the national average of organizations benchmarked.
• FIGS is positioned as the "industry's category-defining healthcare apparel and lifestyle brand," having "redefined what scrubs are" and "revolutionized the large and fragmented healthcare apparel market," contrasting with legacy participants who had "outdated business models" and "commoditized products."

Management Changes

Corporate Governance

Legal Proceedings

• A putative class action securities litigation, alleging violations of the Securities Act and Exchange Act for allegedly making false and misleading statements between May 27, 2021, and February 28, 2023, regarding the company's ability to predict customer demand, manage supply chain, inventory, air freight usage, and costs, was dismissed by the court in January 2025, with judgment entered against the plaintiffs on February 13, 2025. Plaintiffs have filed a notice of appeal.
• Related derivative lawsuits (McMurtrie Action, Wubben Action, Lawani Action, Kimmen Action, Carter Action) asserting similar claims are currently pending but voluntarily stayed until the resolution of the Class Action Securities Litigation appeal.
• The company intends to vigorously defend against these claims.

Related Party Transactions

• In November 2024, the company purchased 27,454,727 shares of OOG, Inc.'s Series A-1 Preferred Stock for $25.0 million, representing a minority interest. Heather Hasson, Executive Chairman, is founder and CEO of OOG.
• In November 2024, the company entered into a Purchase Order Agreement with Baron Capital Management, Inc. (BCM), a subsidiary of Baron Capital Group, Inc. (BCG), pursuant to which BCM purchased $1.0 million of FIGS products for BCG's 2024 annual conference.
• In January 2025, the company entered into a binding term sheet with BCM and BAMCO, Inc. (Baron), a subsidiary of BCG, for a stockholders agreement.
• In February 2025, the company entered into the stockholders agreement with Baron, who are beneficial owners of greater than 5% of the company's Class A common stock.
• In March 2025, the company entered into a License Agreement with OOG, pursuant to which FIGS licensed approximately 2,200 square feet of unused office space to OOG for nominal consideration.
• In February 2025, the company established the FIGS Awesome Humans Foundation, a 501(c)(3) public charity, and donated $0.3 million to it in 2025.
• In November 2025, the company entered into a Purchase Order Agreement with BAMCO, pursuant to which BAMCO purchased $0.9 million of FIGS products for BCG's 2025 annual conference.
• In the year ended December 31, 2025, the company sold a total of $1.0 million of certain FIGS products to affiliates of BCG.

Stakeholder Impact

• Shareholders: Positive impact from increased net income, adjusted EBITDA, and share repurchase program. Potential negative impact from gross margin pressure due to tariffs and ongoing legal proceedings. Dual-class structure and voting agreements limit influence.
• Employees: Positive impact from competitive compensation, benefits, equity awards, and a high employee engagement score. Potential impact from expansion plans requiring additional hiring and management.
• Customers: Positive impact from continued product innovation, expanded product offerings, and enhanced digital and physical (Community Hubs) shopping experiences. Potential negative impact from increased prices due to tariffs or shipping costs.
• Suppliers/Manufacturers: Continued engagement with a diversified global network, but subject to pressure from tariff mitigation strategies and ethical practice requirements.
• Creditors: Positive impact from extended credit facility maturity date and reduced commitment fees, indicating stable financial health.

Next Steps

• Landlord to use reasonable efforts to deliver possession of the Relocated Premises by April 15, 2026.
• Tenant to quit and surrender the Original Premises on or prior to 15 days following the Relocation Date.
• Tenant to have a temporary license to access and use the Temporary Premises from February 1, 2026, until the Original Premises Surrender Date.
• Tenant to provide Landlord with a finalized list of desired Additional Work items by December 19, 2025.
• Tenant to pay 50% of the Cost Estimate for Additional Work by the later of January 15, 2026, or 10 days after notifying Landlord of desired items.
• Tenant to pay the remaining 50% of the Cost Estimate for Additional Work within 10 days after Landlord provides notice of substantial completion.
• The parties will work in good faith to agree upon the location, terms, and conditions for exterior Building signage for FIGS after the Effective Date.
• The company plans to open additional Community Hubs in the future.
• The company intends to operate additional fulfillment centers in the future.
• The company plans to continue to invest in its brand and performance marketing to help drive future growth.
• The company will continue to monitor the impact of inflation on raw materials, freight, labor, rent, and other costs.
• The company plans to continue to implement mitigation strategies in response to elevated U.S. tariff levels.
• The company will continue to vigorously defend against the Consolidated Federal Court Derivative Action and Consolidated Delaware Court Derivative Action.
• The company will continue to invest in and implement modifications and upgrades to its IT Systems and procedures.
• The company intends to pursue additional intellectual property protection.
• The company intends to renew foreign design registrations expiring between 2030 and 2050.
• The company intends to retain any future earnings to finance the operation and expansion of its business, as well as fund its share repurchase program.
• The company may use derivative instruments to hedge foreign currency exposures in the future.

Key Dates

Recommendation

FIGS demonstrated strong top-line growth and a significant rebound in net income, indicating effective operational leverage and customer engagement. However, the persistent and increasing impact of tariffs on gross margin, coupled with a decrease in operating and free cash flow, presents a notable headwind. While the legal proceedings dismissal is positive, the appeal and ongoing derivative suits introduce continued uncertainty. The company's strategic initiatives like office relocation, credit facility extension, and share repurchases are prudent, but the tariff outlook for 2026 suggests potential for further margin compression. A "hold" recommendation reflects the balance between strong underlying business performance and significant external pressures that could impact future profitability.

Keywords

Healthcare apparel, Scrubs, Direct-to-consumer, DTC, E-commerce, Financial results, 10-K, SEC filing, FIGS, FIONx, Active customers, Net revenues, Gross margin, Net income, Adjusted EBITDA, Supply chain, Tariffs, Office lease, Share repurchase, Corporate governance, Risk factors, California, Santa Monica, Goodyear Arizona