FIGS, Inc.: "All About Scrubs"

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Recent IPOs are always going to be tricky, but FIGS, Inc. (FIGS) has a straightforward growth story (and jaw-dropping growth numbers) that’s hard to ignore. The company is all about scrubs, the cheap-looking garments healthcare professionals usually wear to work. It seems like a niche market, but it’s quite large ($12 billion in the U.S. alone), and because of who wears it, it’s recession-proof, too.

However, unlike so many other apparel sub-sectors, there’s been no real improvements in the garb for decades. That’s where FIGS comes in: Using a proprietary fabric technology called FIONx, it offers 13 core brands that feature stretchable, anti-odor, anti-wrinkle, and moisture-wicking apparel for healthcare workers.

Those 13 brands make up north of 80% of revenue, but FIGS is also moving into other categories for the healthcare sector (lab coats, compression socks, etc.), which is going well and boosting its potential market. Throw in the fact that the company's gone heavy on e-commerce (98% of sales come online, thus bypassing the thicket of distribution channels for scrubs), and the products have taken off.

Revenue growth has been in the triple digits for many quarters, while the bottom line has been in the black for many quarters in a row. Analysts see a loss for the full year 2021, but that’s likely incorrect.

Moreover, the sub-metrics are also impressive, with FIGS already racking up 1.5 million active buyers as of Q1 (up 200,000 quarter-over-quarter), with 62% of revenue last year coming from repeat customers. If management pulls the right levers, we think FIGS can go very far.

Technically, there’s not much to analyze with FIGS, which just came public in late May, but there are a few things to note. First, while not super liquid, the stock is gaining a following, with shares regularly trading one to two million shares per day.

Second, of course, was the strong accumulation seen in June as the stock exploded to new highs. And now we see FIGS pulling back eight points and finding support recently at its 25-day moving average. It’s not a name to invest the rent money in, but if you’re game, you can start a position around here and use a loose stop.

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