• Net Revenue: Decreased 2% to $140.2 million.
• Average Order Value (AOV): Decreased 5% to $108.
• Active Customers: Increased 4% to 2.7 million.
• Net Revenue per Active Customer: Decreased 3% to $205.
• Scrubwear Revenue: Increased 2%, representing 84% of net revenues.
• Non-Scrubwear Revenue: Declined 16%, representing 16% of net revenues.
• Gross Margin: Contracted 130 basis points to 67.1%.
• Selling Expense: $38.6 million, 27.5% of net revenues.
• Marketing Expense: $28.5 million, 20.3% of net revenues.
• General & Administrative (G&A) Expense: $35.5 million, 25.3% of net revenues.
• Adjusted EBITDA: $4.8 million with a margin of 3.4%.
• Net Loss: $1.7 million or a diluted EPS loss of $0.01.
• Cash, Cash Equivalents, and Short-term Investments: $281.7 million.
• Inventory: Declined 14% year-over-year to $123.4 million.
• Free Cash Flow: $18.4 million in the third quarter.
• Share Repurchase: Approximately $7 million worth of shares repurchased.

• Warning! GuruFocus has detected 8 Warning Signs with OPEN.

Release Date: November 07, 2024

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

Positive Points

• FIGS Inc (NYSE:FIGS) reported strong cash flow generation with a record amount of cash, cash equivalents, and short-term investments totaling $281.7 million, along with no debt.
• The company successfully transitioned its fulfillment center to Arizona, which is expected to increase flexibility, reliability, and efficiency as they scale towards a $1 billion-plus business.
• FIGS Inc (NYSE:FIGS) experienced higher year-over-year purchase frequency for the second straight quarter, indicating strong customer loyalty.
• The brand's Olympics campaign was a significant success, generating over 1 billion earned media impressions and increasing brand search and site traffic.
• International growth remains a key focus, with FIGS Inc (NYSE:FIGS) now operating in 33 countries and planning further expansion in Asia, particularly Japan.

Negative Points

• Net revenues decreased by 2% to $140.2 million, falling below expectations due to issues with footwear inventory and promotional timing.
• Adjusted EBITDA margin finished below plan, with a significant year-over-year decline from 17.2% to 3.4%, primarily due to marketing and fulfillment investments.
• The company faced challenges with footwear, including delays in stock-outs and the impact of removing the category from promotions, contributing to a decline in non-scrubwear sales.
• Gross margin contracted by 130 basis points to 67.1%, driven by higher discounted sales and product mix shifts.
• FIGS Inc (NYSE:FIGS) adjusted its full-year 2024 net revenue outlook to negative 1% to flat growth, reflecting a cautious stance on the holiday period and Black Friday, Cyber Monday events.

Q & A Highlights

Q: What are the key initiatives from 2024 that will become tailwinds in 2025 for FIGS? A: Trina Spear, CEO, highlighted that FIGS is focusing on product innovation, marketing, and growth levers such as international expansion, teams business, and community hubs. The company has standardized its fit and improved fit tools, which will be launched in a campaign next year. They are also investing in international growth and building an outbound sales strategy for their teams business.

Q: How is FIGS managing potential tariffs and their supply chain? A: Trina Spear stated that FIGS' finished goods are not sourced from China, and the company remains nimble across its supply chain to optimize supplier relationships and ensure high-quality goods for healthcare professionals.

Q: Can you provide more details on the U.S. customer trends and the impact of footwear on sales? A: Trina Spear explained that the decline in the U.S. business was due to controllable issues such as footwear inventory and pricing, and the timing of promotions. The company is focused on executing well to improve these areas.

Q: What are the dynamics affecting Average Order Value (AOV), and how can it be improved? A: Sarah Oughtred, CFO, noted that AOV was impacted by duty subsidies reclassification, higher discounts, and inventory management strategies. The company is working on keeping inventory clean and expects these dynamics to stabilize.

Q: How does FIGS plan to balance brand-building events with traditional marketing? A: Trina Spear emphasized that FIGS will continue to be opportunistic with large campaigns like the Olympics while maintaining a full-funnel marketing approach. The company aims to be disciplined in spending while seizing strategic opportunities.

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