FIGS (FIGS) Q4 2024: International Sales Surge 45%, While Promotional Reset Signals Near-Term Revenue Pressure

February 27, 2025 | By EarningsIQ Research

FIGS closed 2024 with solid momentum driven by international expansion and product innovation, yet signals a strategic promotional reset that will weigh on near-term growth. The company’s evolving fit and fabric initiatives alongside channel investments position it for longer-term brand health despite expected revenue headwinds in 2025.

Summary

• Global Expansion Accelerates: International revenue growth reached an all-time high, reflecting successful market diversification.
• Strategic Promotional Shift: A deliberate pullback on promotions aims to enhance brand equity but will pressure top-line results.
• Operational Investments Underway: New leadership and supply chain recalibration signal focused efforts to improve efficiency and customer experience.

Business Overview

FIGS is a direct-to-consumer healthcare apparel and lifestyle brand focused on serving healthcare professionals with innovative, comfortable, and durable apparel. The company generates revenue primarily through two segments: scrubwear, which accounts for roughly 80% of net revenues, and non-scrubwear, including footwear and loungewear. Its geographic footprint spans the United States and over 20 international markets, with a growing emphasis on global expansion and B2B (business-to-business) sales through its TEAMS platform.

Performance Analysis

FIGS reported fourth quarter net revenues of $151.8 million, up 4.8% year-over-year, driven by a 45.2% surge in international sales to $24.3 million, which now represent 16% of total revenues, a company record. Scrubwear revenues grew 2.4% to $114.7 million, while non-scrubwear rebounded strongly with a 12.8% increase, benefiting from improved footwear inventory and new underscrub fabrications. Despite these top-line gains, gross margin contracted slightly due to product mix shifts favoring lower-margin categories, partially offset by duty drawback benefits.

Operating expenses rose 11.6% year-over-year, reflecting higher fulfillment center costs and shipping expenses as the company ramped operations at its new distribution facility. Selling expenses notably deleveraged due to lapping prior year duty reclassification benefits and ongoing logistics inefficiencies. Marketing and general administrative expenses showed leverage, with marketing spend down as a percentage of sales following the outsized 2024 Olympics campaign. Adjusted EBITDA declined to $21.1 million with a margin of 13.9%, reflecting the expense pressures and mix changes. Net income fell sharply to $1.9 million, impacted by elevated costs and margin compression.

• Customer Dynamics: Active customers increased 3% to 2.7 million, but net revenues per active customer declined 1%, driven by lower units per transaction despite higher repeat frequency.
• Inventory Discipline: Inventory declined 3% year-over-year and 35% from peak levels two years prior, supporting a healthier inventory position.
• Capital Allocation: The company repurchased $38.2 million of shares in Q4 and announced a $50 million increase to its repurchase authorization, underscoring confidence in long-term value.

Overall, FIGS demonstrated resilience in a challenging environment, with international growth and product innovation offsetting softness in the U.S. market and margin headwinds. The company’s financial position remains strong, supported by robust free cash flow generation of $64.1 million for the full year.

Executive Commentary

Strategic Positioning

1. International Market Expansion

FIGS is aggressively growing its international footprint, with 45% revenue growth in Q4 and entry into 10 new countries in 2024. The company is investing in localized marketing, language support, and tailored product assortments, particularly targeting complex markets such as Japan and South Korea in 2025. International sales now constitute a meaningful 16% of revenues, positioning FIGS to diversify beyond its U.S. base and capture global healthcare apparel demand.

2. Promotional Strategy Reset

After two years of elevated promotional activity to reduce excess inventory, FIGS is shifting towards a more disciplined promotional cadence focused on strategic, brand-aligned campaigns. This move aims to strengthen brand equity and improve full-price sales, though it is expected to create near-term headwinds on revenue growth and customer acquisition. Management emphasized a reduction in site-wide promotions while maintaining targeted events that celebrate healthcare professionals.

3. Product Innovation and Fit Calibration

FIGS continues to advance its core product offering through new fabric innovations such as the Formaxx line, designed for enhanced comfort and stretch. The company is also refining its fit standardization efforts, now targeting a full rollout and marketing of updated fit profiles in the second half of 2025. These initiatives seek to deepen customer engagement and satisfaction, critical for retention and frequency growth.

4. Supply Chain and Fulfillment Optimization

Following the onboarding of a new Chief Operating Officer, FIGS reassessed its supply chain roadmap, deciding to pause the planned Canadian distribution center investment to focus on optimizing its existing facility. The company expects to improve fulfillment efficiencies and manage elevated logistics costs while supporting its growing international mix. These operational refinements are key to reducing cost pressures and improving service levels.

5. Channel and Community Development

FIGS is expanding its B2B TEAMS platform with outbound sales efforts and gifting solutions, aiming to capture institutional healthcare apparel demand. The company is also testing retail community hubs, with plans to open additional physical stores in 2025 to complement its D2C digital platform. These channel expansions are designed to broaden customer reach and deepen community connections.

Key Considerations

FIGS’ 2024 results highlight the tension between near-term margin and revenue pressures and longer-term investments to solidify brand strength and growth. Key considerations for investors include:

• Inventory Normalization: The company’s disciplined inventory management has improved product availability and reduced the need for discounting, enabling the promotional reset.
• Customer Engagement Dynamics: While active customers grew modestly, churn and acquisition softness reflect challenges in sustaining growth amid changing promotional tactics.
• Margin Mix Impact: Growth in lower-margin non-scrubwear and international sales, while positive for diversification, is dilutive to overall gross margin.
• Capital Deployment Balance: Share repurchases signal confidence, but capital allocation will need to balance investments in innovation, marketing, and channel expansion.
• Leadership Changes: New executive hires in operations and product signal a strategic emphasis on execution excellence and innovation acceleration.

Risks

FIGS faces risks from promotional cadence shifts that could depress near-term revenue and customer growth. Supply chain inefficiencies and elevated logistics costs may persist as the company optimizes its fulfillment network. Competitive pressures in healthcare apparel and potential macroeconomic headwinds impacting healthcare professionals' spending also pose challenges. International expansion introduces execution complexity and cost variability, while inventory management remains critical to avoid obsolescence.

Forward Outlook

For fiscal 2025, FIGS expects net revenues to decline in the low single-digit range year-over-year, reflecting the promotional reset and potential declines in active customers. Adjusted EBITDA margin guidance is between 9.0% and 9.5%, roughly flat with 2024, with first quarter margins anticipated at 5.5% to 6%. Management plans modest capital expenditures of approximately $5 million, focused on retail expansion and foundational investments. The board approved a $50 million increase to the share repurchase program, underscoring confidence in long-term value creation.

• Q1 2025 net revenue expected to be approximately flat year-over-year.
• Full-year gross margin expected to be stable around 67.6%, with promotional reductions offset by product mix.
• Marketing spend to moderate from Olympics-level investment but include targeted funnel and international investments.

Takeaways

FIGS is navigating a critical inflection point balancing near-term revenue headwinds with strategic investments to reinforce its brand and operational foundation. The company’s strong international growth and product innovation provide a platform for future expansion, but execution risks remain in promotional repositioning and supply chain optimization.

• International Growth as a Diversifier: The 45% international revenue surge in Q4 and planned Asian market entries highlight FIGS’ commitment to global expansion, mitigating U.S. market saturation risks.
• Promotional Discipline to Enhance Brand Health: The shift away from transactional promotions aims to improve full-price sales and customer quality, though it will pressure near-term top-line growth and acquisition.
• Operational Focus and Leadership Strengthening: New COO and product leadership appointments, alongside supply chain reassessment, signal a sharpened focus on execution and customer experience improvements.

Conclusion

FIGS closed 2024 with promising international momentum and product innovation but faces a challenging 2025 as it recalibrates promotions and supply chain investments. The company’s strategic pivots and strong financial position support confidence in its ability to restore growth and margin expansion over the medium term.

Industry Read-Through

FIGS’ results underscore the evolving dynamics in healthcare apparel, where brand differentiation, product innovation, and omnichannel presence are critical for growth. The promotional reset signals a broader industry trend toward balancing discounting with brand equity preservation. Rising international demand for healthcare apparel offers a significant growth vector, but operational excellence and supply chain agility remain key competitive levers. Other players should monitor FIGS’ approach to fit standardization and fabric innovation as benchmarks for customer engagement strategies.

FIGS Consumer Discretionary Apparel International Expansion Promotional Strategy Supply Chain Product Innovation