FIGS, Inc.: Redefining Healthcare Apparel with a Direct-to-Consumer Model

FIGS, Inc. is a direct-to-consumer apparel brand exclusively designed for healthcare professionals. The company was founded to address the long-standing need for comfortable, functional, and stylish workwear in the medical field. FIGS generates revenue primarily through its e-commerce platform, figs.com, where it sells a range of products including scrubs, lab coats, underscrubs, and related accessories. The company's target customer is the healthcare professional who values both form and function, and it leverages a community-based marketing strategy to build brand loyalty. As of the latest data, FIGS has a market capitalization of $2.4 billion, with 157.86 million shares outstanding. The company operates with a digital-first approach, managing its entire supply chain and customer relationship online, which allows for rapid iteration on product design and a highly personalized shopping experience.

• Near-Term Growth Drivers: In the near term, FIGS is focused on deepening its penetration within its existing customer base through product line extensions and enhanced personalization. The introduction of new fabrics, colors, and styles, along with the expansion into adjacent categories like compression socks and outerwear, is designed to increase average order value and purchase frequency. Additionally, the company is investing in its supply chain to reduce lead times and improve inventory availability, which should help capture demand more effectively.
• Medium-Term Growth Drivers: The medium-term growth strategy is anchored on geographic expansion and the cultivation of new customer segments. Internationally, FIGS is targeting markets in Canada, Europe, and Australia, where the healthcare apparel market is large but underserved by premium, direct-to-consumer brands. Domestically, the company is ramping up efforts to capture a larger share of the veterinary, dental, and allied health markets. These initiatives are expected to broaden the company's revenue streams and drive sustained double-digit revenue growth over the next 3-5 years.

Note: 2023A and 2024A figures are estimates based on reported trends; 2025E and 2026E are forward projections.

FIGS' financial performance is characterized by a strong gross margin profile that has remained stable in the high-60s to low-70s range, reflecting the company's pricing power and efficient cost structure. Operating margins have been expanding as the company gains operating leverage from its fixed cost base. The current EPS of $0.33 aligns with our 2024A estimate. Going forward, we project continued margin expansion driven by scale benefits, a richer product mix, and disciplined expense management, which should lead to earnings growth outpacing revenue growth.

The healthcare apparel market is a subset of the broader uniform and workwear industry, estimated to be worth over $100 billion globally. Within this space, the premium segment for fashionable and functional scrubs has been growing rapidly, fueled by a generational shift in healthcare worker preferences. FIGS operates in a highly fragmented market, with the majority of sales still captured by traditional, low-tech players. Key named competitors include:

• Healing Hands: A long-standing brand known for its wide range of styles and colors, but typically sold through third-party retailers.
• Cherokee Uniforms: A major player with a significant wholesale presence, offering a value-oriented product.
• Med Couture: A competitor focusing on trendy designs and a younger demographic, often found in retail stores.
• Jaanuu: A direct-to-consumer brand with a similar model to FIGS, targeting a fashion-forward audience.

FIGS' primary competitive advantage lies in its brand equity and digital-native operating model. While competitors like Jaanuu offer a similar online experience, FIGS has built a larger and more engaged community, giving it an edge in brand awareness and customer loyalty. The company's focus on a premium product and a seamless customer experience has allowed it to command a price premium over most of its traditional competitors.

FIGS is currently trading at $14.56, giving it a market cap of $2.4B. On a price-to-earnings basis, the company trades at approximately 44x its current EPS of $0.33, and about 34x our 2025E EPS of $0.43.

Discounted Cash Flow (DCF): Our DCF analysis assumes a 10% weighted average cost of capital (WACC) and a long-term growth rate of 4%. We project revenue to grow at a CAGR of ~13% over the next five years, with operating margins expanding to 15% by the end of the forecast period. This yields a fair value estimate of approximately $17.00 per share.

Comparable Company Analysis:

While FIGS trades at a premium to traditional apparel makers on a P/E basis, its growth rate, high gross margins, and direct-to-consumer model command a justified premium. However, its high short interest and the volatility in the stock price suggest that the market is uncertain about its ability to sustain its growth trajectory. Our target price of $16.00 implies a forward P/E of ~37x, which is a slight premium to its growth rate, reflecting a balanced view of its opportunities and risks.

• High Short Interest and Market Sentiment: With nearly 20% of the float shorted, the stock is susceptible to sharp price swings. Any negative news or earnings miss could trigger a significant sell-off, while positive surprises could lead to a short squeeze. This creates a high level of volatility that may not reflect the underlying business fundamentals.
• Supply Chain and Inventory Management: As a direct-to-consumer company, FIGS relies heavily on a smooth supply chain. Disruptions, increased shipping costs, or inventory mismanagement could lead to margin compression and lost sales. The company's expansion into new categories increases this complexity.
• Intense Competition and Brand Dilution: The premium scrub market is becoming increasingly crowded, with new entrants and established players vying for market share. If FIGS fails to innovate or maintain its brand image, it could lose its competitive edge and pricing power. An over-expansion into non-core categories could also dilute the brand's focus.
• Dependence on Discretionary Spending: While scrubs are a workwear necessity, the premium price point of FIGS products makes them a discretionary purchase for some healthcare workers. In an economic downturn, consumers may trade down to lower-priced alternatives, impacting FIGS' revenue growth and profitability.