Release Date: February 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• FIGS Inc (NYSE:FIGS) reported a 5% year-over-year revenue growth in Q4 2024, surpassing their implied range for the quarter.
• The international business segment grew by 45% in Q4, reaching an all-time high of 16% of net revenues.
• The company ended the year with a strong financial position, boasting over $245 million in net cash and investments.
• FIGS Inc (NYSE:FIGS) successfully launched new product lines, including the Team USA collection and partnerships with New Balance and Echo.
• The company made significant strides in community support, including opening a new operating theater in Kenya and advocating for healthcare professionals on Capitol Hill.

Negative Points

• FIGS Inc (NYSE:FIGS) experienced inconsistencies in performance throughout the year, with challenges in customer acquisition and pressures on healthcare professionals.
• The company faced gross margin pressure due to changing product mixes and strategic SGNA investments.
• There is an anticipated negative impact on top-line performance in 2025 due to a shift in promotional strategies.
• Selling expenses significantly deleveraged in Q4 due to duty reclassification impacts and fulfillment center inefficiencies.
• The company expects net revenues for fiscal 2025 to decline in the low single-digit range year-over-year, reflecting headwinds from reduced promotions and potential declines in active customers.

Q & A Highlights

• Warning! GuruFocus has detected 6 Warning Signs with OPEN.

Q: Can you discuss your plans to maintain and reengage lapsed customers amid a promotional reset, and how you plan to address the lower trend of new customer acquisition? A: Sarah Altred, CFO: We are seeing headwinds on acquisition, partly due to our promotional cadence. As we head into 2025, we plan to readjust our promotional outlook and make investments in both existing brand efforts and upper funnel strategies to increase awareness and consideration. We will also make targeted investments in the customer funnel to help with retention trends.

Q: Can you elaborate on the decision to pause the Canadian distribution center investment and the expected impact on supply chain opportunities for margin expansion? A: Sarah Altred, CFO: Our new COO has reassessed our roadmap, identifying opportunities for optimization and savings. We see significant improvement potential by focusing on our current distribution facility, so the Canadian DC will be part of our plans but not in 2025.

Q: What are the building blocks to return to a normalized growth algorithm, and how much of this is influenced by the environment versus management actions? A: Sarah Altred, CFO: Reinvigorating growth in our US business and active customer base is crucial. We are also focusing on building out our retail, international, and team channels. Top-line expansion will help leverage bottom-line costs and support future growth investments.

Q: How should we think about selling and G&A expenses in fiscal 2025, particularly regarding supply chain fulfillment costs and stock-based compensation? A: Sarah Altred, CFO: Transitory costs related to our DC transition should normalize next year, partially offset by higher fixed costs from operating a larger facility and increased international mix. G&A will see lower stock-based compensation, with investments in resources to support business growth.

Q: Why shift away from the prior promotional stance, and what will the new promotional strategy look like? A: Sarah Altred, CFO: We are moving away from a transactional approach needed to reduce inventory towards strategic promotions that celebrate healthcare professionals. With improved inventory, we can shift focus to solidifying long-term brand positioning, maintaining some promotions for healthcare professionals.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.