Did FIGS' Q4 2025 Earnings Signal a Turnaround

Key Takeaways

• FIGS delivered a robust Q4 2025 performance, significantly beating revenue and EPS estimates, driven by strong scrubwear sales and international expansion.
• The company's strategic focus on product innovation, direct-to-consumer engagement, and omnichannel expansion underpins its ambitious long-term growth targets.
• Despite impressive growth and a positive outlook, FIGS' current valuation metrics suggest the market has largely priced in its future potential, warranting a cautious "Hold" consensus from analysts.

Did FIGS' Q4 2025 Earnings Signal a Turnaround?

FIGS (NYSE: FIGS) certainly turned heads with its fourth-quarter and full-year 2025 financial results, reporting a significant beat on both the top and bottom lines. The healthcare apparel brand saw its shares surge by 13.78% to $12.47 on the news, reflecting investor optimism following a period of underperformance relative to the broader market. This strong quarterly showing, characterized by accelerating revenue growth and improved profitability, suggests the company is effectively navigating a dynamic retail landscape.

The company posted net revenues of $201.9 million for Q4 2025, a remarkable 33.0% increase year-over-year, handily surpassing the Zacks Consensus Estimate of $165.32 million by 21.82%. This impressive top-line growth was mirrored in profitability, with GAAP earnings per share (EPS) coming in at $0.10, a substantial beat against the consensus estimate of $0.02. This marks the fourth consecutive quarter FIGS has exceeded EPS estimates, demonstrating a consistent ability to outperform expectations.

Digging deeper into the numbers, the growth was broad-based. Scrubwear, FIGS' core product category, saw net revenues climb 35.1% to $154.9 million. International markets were a particular standout, with net revenues soaring 55.1% to $37.7 million, highlighting the success of global expansion efforts. The average order value (AOV) also increased to $120 for the full year 2025, up from $113 in 2024, indicating customers are spending more per transaction. These metrics collectively paint a picture of a brand resonating strongly with its target demographic, driving both customer acquisition and increased monetization.

What's Driving FIGS' Continued Growth and Market Expansion?

FIGS' robust performance isn't just a quarterly fluke; it's the result of a deliberate, multi-pronged growth strategy centered on product innovation, direct-to-consumer (DTC) engagement, and strategic market expansion. The company has successfully carved out a premium niche in the historically utilitarian healthcare apparel market by focusing on style, comfort, and functionality. This brand affinity is a powerful differentiator against traditional uniform providers.

At the heart of FIGS' appeal is its proprietary fabric technology. Materials like FIONx and FIONluxe offer advanced features such as 99.5% bacterial resistance and 99.9% moisture-wicking capabilities, alongside ergonomic designs that incorporate practical elements like badge loops and instrument holders. The continuous introduction of new fabric platforms, such as FORMX™ and FLOAT, ensures the product portfolio remains fresh and responsive to healthcare professionals' evolving needs. This commitment to in-house development and technical comfort fosters strong brand loyalty and justifies premium pricing.

Beyond product, FIGS is aggressively expanding its reach through both geographical and channel diversification. International net revenues for the full year 2025 surged 27.5% to $103.6 million, with Q4 alone seeing a 55.1% jump. The company has strategically entered new markets like Japan and South Korea in 2025, alongside a broad deployment across 12 new markets in Latin America, aiming to unlock significant new growth opportunities. Domestically, FIGS is enhancing its omnichannel presence by establishing "Community Hubs" – physical retail locations designed to drive direct engagement and higher customer lifetime value. With five existing hubs and plans for four more in 2026, these locations serve as experiential touchpoints, complementing its digital-first DTC model.

Can FIGS Maintain Profitability Amidst Growth and Tariffs?

While top-line growth has been impressive, investors are keenly focused on FIGS' ability to translate this into sustainable profitability, especially given external pressures like tariffs. The company's Q4 2025 results showed a mixed picture on margins, but management's forward guidance suggests confidence in future margin expansion.

For Q4 2025, FIGS reported a gross margin of 62.9%. This was a decrease of 440 basis points year-over-year, primarily attributed to higher tariffs and the absence of duty drawback claims that benefited the prior year. Additionally, the quarter included a $5.6 million inventory write-off, which further impacted gross profitability. However, these headwinds were partially offset by a lower discount rate during the period and favorable freight rates, demonstrating some operational agility. The operating margin, a key indicator of efficiency, improved significantly to 9.3% in Q4, up from 5.9% in the same quarter last year.

Looking ahead, FIGS has provided optimistic guidance for fiscal year 2026, projecting net revenues growth of 10-12% and an adjusted EBITDA margin of 12.7-12.9%. This outlook factors in the impact of new 15% global tariffs, suggesting the company has strategies in place to mitigate these costs. Management expects Q1 2026 to show low-20% revenue growth year-over-year, with the highest quarterly gross margin for the year, indicating a strong start to the new fiscal year. The full-year 2025 saw net income climb to $34.3 million from $2.7 million in 2024, with an improved net income margin of 5.4%. Free cash flow for the full year was $53.0 million, underscoring healthy cash generation. These figures, coupled with a current ratio of 4.82, point to a financially sound operation capable of funding its growth initiatives.

Is FIGS' Valuation Justified After Its Recent Surge?

FIGS' stock has experienced a significant rebound, with shares up 86.4% over the past year and a notable 13.78% jump following the Q4 earnings beat. This strong performance raises the critical question of whether the current valuation is justified or if the growth is already priced in. As of the latest close, FIGS trades at $12.47 with a market capitalization of $2.05 billion.

When examining traditional valuation multiples, FIGS appears to trade at a premium. Its trailing twelve-month (TTM) P/E ratio stands at 115.78, significantly higher than the broader market and even its industry peers. The P/S ratio of 3.53 and EV/EBITDA of 50.21 also suggest a rich valuation, reflecting high growth expectations. For context, the "Luxury industry average" P/E is cited around 21.24x, making FIGS' current multiple appear stretched by comparison. A Discounted Cash Flow (DCF) analysis from one source even suggested the stock could be overvalued by 123.7% relative to its intrinsic value of $4.58 per share, based on its free cash flow projections.

However, a purely historical or industry-average valuation might not fully capture FIGS' unique position as a disruptive, direct-to-consumer brand with strong growth potential in a specialized niche. The "Bull Case" narrative, which assumes modestly higher revenue growth (around 9.24% annually), improving profit margins, and a future P/E of 60.0x, projects a fair value of $15.00 per share. This implies a potential upside of approximately 20% from current levels. Conversely, a "Bear Case" narrative, with a fair value of $7.21 per share, highlights risks such as execution pressure, foreign exchange exposure, and competition. Wall Street analysts currently hold a "Hold" consensus on the stock, with an average price target of $10.38, suggesting limited upside from the current price.

What Are the Key Risks and Opportunities for FIGS Investors?

Investing in FIGS, despite its recent strong performance, comes with a distinct set of risks and opportunities that investors should carefully consider. The company operates in a specialized market, which offers both insulation and concentration risk. Its direct-to-consumer model, while efficient, also exposes it to the vagaries of online retail and customer acquisition costs.

One primary opportunity lies in FIGS' continued international expansion. With international revenues growing 55.1% in Q4 2025, the global healthcare apparel market, estimated to grow at a CAGR of 5.4% from 2026 to 2033, presents a massive runway. The company's B2B "Teams" segment, targeting healthcare institutions for bulk purchasing, is another significant growth avenue, positioned for long-term scale and margin leverage. Furthermore, ongoing product diversification beyond core scrubwear into new categories and fabric platforms could unlock additional revenue streams and expand its total addressable market.

However, several risks loom. The healthcare apparel market, while growing, is becoming increasingly competitive, with both established players and emerging brands vying for market share. FIGS' premium pricing strategy could face pressure if economic cycles weaken or if competitors offer compelling alternatives. Tariffs, as evidenced by the Q4 gross margin impact, remain a persistent headwind that could compress profitability. Execution risk is also significant; maintaining high growth rates, managing inventory effectively (as highlighted by the $5.6 million write-off), and successfully integrating new community hubs and international markets will be crucial. Finally, the stock's high valuation multiples leave less room for error, making it particularly sensitive to any operational missteps or decelerations in growth.

FIGS' Q4 2025 results demonstrate impressive momentum and strategic execution, positioning the company for continued growth in its niche market. While the stock's recent surge reflects this optimism, investors should weigh the significant opportunities against the inherent risks and its premium valuation. A "Hold" rating from analysts suggests a balanced view, indicating that much of the good news may already be factored into the current share price.

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