Figs (FIGS): A Profitable Growth Story in Healthcare Apparel

The healthcare apparel sector in 2025 is a study in contrasts: technological innovation and regulatory scrutiny, rising demand and production cost pressures. Amid this volatile landscape, Figs (FIGS) has emerged as a standout performer, with its Q2 2025 results underscoring its ability to navigate sector headwinds while delivering robust growth. For investors, the question is no longer whether FIGS can survive in this environment but whether it can capitalize on its momentum to cement its position as a long-term leader in a market poised for transformation.

Q2 2025: A Blueprint for Resilience

Figs' Q2 2025 financials tell a story of disciplined execution and strategic adaptability. Net revenues rose 5.8% year-over-year to $152.6 million, driven by a 7.7% increase in scrubwear sales to $127.4 million and a 19.8% surge in international net revenues to $22.7 million. While non-scrubwear revenue dipped 2.5%, the company's focus on its core scrubwear business—accounting for 83% of total sales—demonstrates a clear prioritization of high-margin, in-demand products.

Profitability metrics further validate FIGS' operational strength. Net income jumped to $7.1 million (4.7% margin) from $1.1 million in Q2 2024, while adjusted EBITDA surged to $19.7 million (12.9% margin), a $6.8 million year-over-year increase. These figures highlight FIGS' ability to convert revenue growth into margin expansion, even as it grapples with challenges like higher inventory reserves and tariffs. The 40-basis-point decline in gross margin to 67.0% is a minor drag but offset by lower return rates and duty drawback gains.

Key operating metrics also reinforce the company's long-term value proposition. Active customers grew 4.1% to 2.74 million, and the average order value (AOV) rose 3.5% to $117, driven by higher retail prices and reduced returns. While net revenues per active customer dipped slightly to $208, this reflects a shift toward higher-value, full-price sales rather than discount-driven growth—a sustainable model in a sector increasingly focused on quality over quantity.

Navigating Sector Headwinds: Innovation and Cost Discipline

The healthcare apparel sector in 2025 is defined by two competing forces: technological disruption and regulatory risk. On one hand, innovations like smart textiles and antimicrobial fabrics are redefining product expectations. On the other, recalls (e.g., 3M's surgical drapes) and rising production costs threaten margins. FIGS' Q2 performance shows it is not only surviving but thriving in this environment.

The company's international expansion is a key differentiator. With 19.8% growth in international net revenues, FIGS is diversifying its customer base and reducing reliance on the U.S. market, which saw a modest 3.7% increase. This global footprint insulates the company from domestic regulatory shifts and trade policy volatility, a critical advantage as U.S. tariffs remain a wildcard.

FIGS is also leveraging operational efficiency to counter cost pressures. Operating expenses fell 3.5% year-over-year to $92.3 million, representing 60.5% of net revenues—a significant improvement from 66.4% in Q2 2024. This cost discipline, combined with a 12.9% adjusted EBITDA margin, positions FIGS to outperform peers like Molnlycke Health Care and Cardinal Health, which face higher production costs and regulatory hurdles.

Competitive Positioning: A Leader in a Fragmented Market

The healthcare apparel sector is highly competitive, with players like Molnlycke and Cardinal Health investing heavily in production capacity and product innovation. Molnlycke's $54.4 million Malaysia plant and Cardinal Health's SmartGown EDGE highlight the importance of R&D and scalability. However, FIGS' direct-to-consumer (DTC) model and brand loyalty give it an edge.

Unlike traditional manufacturers reliant on hospital contracts, FIGS' DTC strategy allows it to capture higher margins and maintain closer relationships with healthcare professionals. Its 2.74 million active customers represent a sticky, high-retention base, with AOV growth indicating strong brand equity. Meanwhile, its focus on premium scrubwear—priced 10–15% above competitors—positions it as a leader in a market increasingly willing to pay for quality and comfort.

Investment Thesis: A Buy for the Long Term

For investors, FIGS' Q2 results and full-year guidance (low-single-digit revenue growth and 8.5–9.0% EBITDA margins) suggest a company in transition. While short-term margin pressures persist, the fundamentals are compelling:

1. Margin Expansion: With gross margin stabilizing and operating expenses declining as a percentage of revenue, FIGS is well-positioned to improve profitability.
2. International Growth: A 19.8% Q2 increase in international sales indicates untapped potential in markets like Europe and Asia-Pacific.
3. Strategic Agility: The company's ability to adjust its product mix, optimize logistics, and navigate trade policy changes demonstrates operational flexibility.

A critical data point for investors is FIGS' stock price trajectory. Over the past three years, the stock has traded between $12 and $24, with a current price of $21.50 (as of August 2025). With a forward P/E ratio of 18.5 and a PEG ratio of 1.2, the stock appears undervalued relative to its growth prospects.

Conclusion: A Sector Leader with Room to Run

Figs' Q2 2025 performance is more than a quarterly win—it's a validation of its long-term value proposition. By combining operational discipline, international expansion, and a premium brand identity, FIGS is not just surviving in a challenging sector but setting the standard for innovation and profitability. For investors seeking exposure to a high-growth, resilient healthcare play, FIGS offers a compelling case. The key is to act before the market fully recognizes its potential.

Investment Recommendation: Buy for long-term growth, with a target price of $28–$30 over the next 12–18 months.