CAMBRIDGE, Mass. - Applied Fundamental Research (AFR), a long-term shareholder of FIGS, Inc. (NYSE: FIGS), has issued a call to action for the healthcare apparel company to define a clear capital allocation strategy to enhance shareholder value. In an open letter to FIGS management and its Board of Directors, AFR praised the company's transformation of the healthcare apparel market and its brand-building success. According to InvestingPro data, FIGS maintains impressive gross profit margins of nearly 68% and holds a market capitalization of approximately $982 million.
AFR expressed confidence in FIGS' ability to execute its growth strategy and improve margins, citing the company's increase in Net Active Customer count by over half a million and its disciplined approach to inventory management. The letter also commended FIGS for its innovative marketing efforts, including the Extremes campaign and Olympic sponsorship. InvestingPro analysis reveals the company's strong financial health with a current ratio of 4.58, indicating robust liquidity to support growth initiatives. Get access to 12+ additional ProTips and comprehensive financial metrics with an InvestingPro subscription.
The investor highlighted the importance of rejecting any acquisition offers that do not reflect FIGS' true value, pointing to the brand's equity, strong balance sheet, and growth opportunities in the global marketplace. AFR believes FIGS is well-positioned for sustained growth and long-term value creation. Based on InvestingPro's Fair Value analysis, FIGS currently appears slightly undervalued, with annual revenue reaching $549 million in the last twelve months.
To close the perceived valuation gap, AFR recommended that FIGS clearly define the capital requirements for key growth initiatives, such as the B2B Teams business, international expansion, brick-and-mortar stores, and distribution infrastructure. Additionally, AFR suggested that FIGS should articulate investment priorities and strategies for funding innovation, as well as manage excess cash on the balance sheet through share repurchases.
The letter from AFR serves as a constructive critique aimed at strengthening investor confidence and showcasing FIGS' growth potential. The information in this article is based on a press release statement from Applied Fundamental Research.
In other recent news, FIGS Inc. reported a mixed bag of Q3 results, with a 17% growth, but a net revenue decrease of 2% to $140.2 million and a net loss of $1.7 million. This contrasts with a profit of $6.1 million in the same quarter the previous year. The company's scrubwear sales experienced a modest 2% increase, while non-scrubwear sales, particularly footwear, declined by a significant 16%. As a result, FIGS has revised its 2024 revenue outlook to a decline of 1% to flat and adjusted its EBITDA margin projections to approximately 8%.
Despite these developments, FIGS maintains a strong balance sheet with $281.7 million in cash and no debt, and continues to expand internationally, now operating in 33 countries with a particular focus on Asia. The company also announced its plans to open a Canadian distribution center in H2 2025 and expects to transition expense headwinds into tailwinds in the same year. Additionally, FIGS is investing in community engagement and education through a $25 million investment in a new company, OOG.
While the company's back-to-school promotional strategy fell short of expectations, leading to an adjusted full-year 2024 revenue outlook, management expressed cautious optimism regarding customer engagement and repeat purchases. The company remains committed to long-term value creation through strategic partnerships and plans to maintain a disciplined marketing approach while remaining opportunistic for future campaigns.
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