FIGS, Inc.'s Outperforming Q2 2025 Results and Strategic Positioning for Sustainable Growth in the Healthcare Apparel Sector

In the evolving landscape of the $79 billion global healthcare apparel market, FIGS, Inc. (NASDAQ: FIGS) has emerged as a standout performer, leveraging its direct-to-consumer (DTC) model, brand equity, and strategic agility to outpace competitors. The company's Q2 2025 results, coupled with its long-term initiatives, paint a compelling picture of a business not only surviving but thriving in a post-pandemic world where healthcare professionals demand more than just functional attire—they seek identity, sustainability, and innovation.

Q2 2025: A Blueprint for Margin Expansion and Revenue Resilience

FIGS reported Q2 2025 net revenues of $152.6 million, a 5.8% year-over-year increase, driven by a 3.5% rise in average order value (AOV) to $117 and a 4.1% growth in active customers to 2.74 million. While scrubwear revenue grew 7.7% to $127.4 million, the decline in non-scrubwear sales (-2.5% to $25.2 million) underscores the sector's concentration risk. However, the company's gross margin of 67.0%—down 40 basis points year-over-year—remained resilient despite higher inventory reserves and tariffs. Operating expenses fell 3.5% to $92.3 million, reducing as a percentage of revenue to 60.5% from 66.4%, a testament to disciplined cost management.

Net income surged to $7.1 million ($0.04 EPS) from $1.1 million ($0.01 EPS) in Q2 2024, while adjusted EBITDA hit $19.7 million (12.9% margin), up 53% year-over-year. These metrics highlight FIGS' ability to convert top-line growth into bottom-line profitability, a critical factor for long-term investors. The company's full-year 2025 guidance—low single-digit revenue growth and adjusted EBITDA margins of 8.5–9.0%—signals confidence in sustaining these gains.

Strategic Initiatives: Building a Durable Competitive Moat

FIGS' success in Q2 2025 is not an anomaly but the result of a multi-pronged strategy designed to future-proof its business:

1. Disciplined Pricing and Brand-Driven Growth
   The company has systematically reduced reliance on discounts, a shift that boosted AOV and gross margins. By prioritizing full-price sales, FIGS is aligning with broader industry trends toward brand equity over short-term promotions. This approach mirrors the playbook of premium DTC brands like Lululemon, which have shown that emotional resonance can drive pricing power.

2. International Expansion as a Growth Catalyst
   International revenue grew 19.8% year-over-year to $22.7 million (15% of total revenue), with Japan and South Korea as key targets for 2025. This diversification mitigates domestic market saturation and taps into high-growth Asian healthcare sectors. The appointment of Jerry Jao, founder of AI-driven marketing platform Retention Science, to the board underscores FIGS' commitment to data-driven international scaling.

3. B2B and Institutional Sales via the TEAMS Program
   The TEAMS initiative, targeting hospitals and clinics, introduces recurring revenue streams and higher-margin bulk contracts. While B2B sales require significant upfront investment in sales teams and attribution tools, the long-term potential for institutional partnerships is substantial.

4. Omnichannel Integration and Community Hubs
   FIGS' Community Hub stores blend physical retail with digital engagement, creating a “halo effect” that drives online sales. These hubs also serve as brand ambassadors, fostering loyalty among healthcare professionals who value in-person product interaction.

5. Sustainability and Product Innovation
   With antimicrobial fabrics and inclusive sizing, FIGS is addressing the growing demand for eco-conscious and functional apparel. This aligns with the rise of brands like Mediclo, which have captured market share with sustainable materials, but FIGS' first-mover advantage in healthcare-specific innovation gives it an edge.

Market Positioning: Navigating a Crowded Field

The healthcare apparel sector is increasingly competitive, with rivals like Jaanuu (positioned as the “Nike of scrubs”), Fabletics (leveraging celebrity partnerships), and Medelita (focusing on premium lab coats) vying for market share. However, FIGS' DTC model, strong brand equity, and early-mover status in digital marketing provide a durable advantage. Its partnership with Fospha, a marketing measurement platform, further enhances its ability to track ROI on brand-building efforts—a critical differentiator in an era where attribution complexity is rising.

Investment Thesis: A High-Margin DTC Play with Scalable Potential

For long-term investors, FIGS presents a compelling case:
- Margin Resilience: Operating expenses as a percentage of revenue have declined from 66.4% in Q2 2024 to 60.5% in Q2 2025, indicating operational efficiency.
- Diversified Revenue Streams: International and B2B growth reduces reliance on domestic DTC sales, which currently account for 97.3% of revenue.
- Strong Balance Sheet: A current ratio of 3.96 and a market cap of $1.06 billion suggest financial stability, with room for strategic acquisitions or R&D investment.
- Valuation Attractiveness: At a forward P/E of ~15x and a P/EBITDA of ~5x, FIGS trades at a discount to peers like Lululemon (P/E ~25x) despite higher margins.

Risks and Mitigants

• International Market Risks: Currency fluctuations and regulatory hurdles in Asia could dampen growth. However, FIGS' data-driven approach and localized marketing strategies mitigate these concerns.
• Competition: New entrants and established rivals may erode market share. FIGS' focus on brand storytelling and product innovation, however, creates a high barrier to entry.
• Attribution Challenges: Measuring the ROI of omnichannel and B2B efforts remains complex. The Fospha partnership and advanced analytics tools are critical to addressing this.

Conclusion: A Buy for the Patient Investor

FIGS, Inc. is a rare blend of a high-margin DTC business and a sector-specific leader in a market poised for 8.9% CAGR growth through 2032. Its strategic pivot from discounting to brand equity, coupled with international and B2B expansion, positions it to outperform in a post-pandemic world where healthcare professionals demand more than just scrubs—they seek a brand that reflects their identity. For investors with a 3–5 year horizon, FIGS offers a compelling opportunity to capitalize on a durable, margin-driven growth story.