FIGS Falls 30%: Revenue Miss and Strategic Investments Weigh on Stock

Shares of FIGS, Inc. (NYSE: FIGS), a leading healthcare apparel brand, have plummeted by approximately 30% following a revenue miss and strategic investments in fulfillment and marketing. The company's third-quarter financial results, released on November 7, 2024, revealed a 1.5% year-over-year decrease in net revenues, driven by a decrease in average order value (AOV) and higher discounted sales. Gross margin also declined by 1.3% YoY, primarily due to higher discounted sales and product mix shift.
The revenue miss and strategic investments have negatively impacted FIGS' financial performance. Operating expenses increased by 17.4% year over year, primarily due to higher marketing and selling expenses, including higher digital and brand marketing expenses related to the 2024 Olympics campaign and higher transitory expenses associated with the transition to a new fulfillment center. As a result, net income margin and adjusted EBITDA margin both declined significantly.

The company's minority investment in OOG, Inc., a new online platform for healthcare professionals, also played a role in the revenue miss. The $25.0 million investment, announced in Q3 2024, is part of FIGS' strategic initiatives to expand its reach and improve the lives of healthcare professionals. However, the investment, along with other strategic expenses, contributed to the increase in operating expenses and negatively impacted net income and adjusted EBITDA margins.
Despite the short-term challenges, FIGS remains committed to its long-term growth strategy. The company's focus on a strong balance sheet and cash flow generation provides ongoing flexibility to invest in its core business, return value to shareholders, and find unique ways to disrupt the industry. The strategic investments in fulfillment and marketing are expected to drive long-term growth and improve the customer experience.

In conclusion, FIGS' stock has fallen by approximately 30% due to a revenue miss and strategic investments in fulfillment and marketing. The company's financial performance has been negatively impacted by higher operating expenses and lower net income and adjusted EBITDA margins. However, FIGS remains committed to its long-term growth strategy and is well-positioned to capitalize on the growing demand for healthcare apparel and services. As the company continues to invest in its core business and strategic initiatives, it is poised for a strong recovery and long-term growth.