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1 Disruptive Apparel IPO With a Bright Future

By Matthew Frankel, CFP® and Danny Vena – Sep 26, 2021 at 7:12AM

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This company might sound like a niche apparel maker, but take a closer look.

Figs (FIGS 2.50%) makes clothing specifically designed for healthcare workers, and to say that the company's growth has been impressive so far would be a massive understatement. In this Fool Live video clip, recorded on Sept. 15, Fool.com contributors Danny Vena and Matt Frankel, CFP, discuss what makes Figs such an interesting investment opportunity right now. 

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Danny Vena: The next recent IPO stock that we're covering is my second favorite stock named after a fruit, and that is FIGS, ticker, F-I-G-S. FIGS is not a household name, but it's taking the world of medical apparel by storm. The company built the largest direct-to-consumer platform for scrubs and other healthcare clothing and it's leading the market in the shift to digital. As a result, the company markets and sells 98% of its products on its e-commerce site or via the mobile app.

Now what makes FIGS so disruptive is if you think about medical clothing, a lot of folks describe those as notoriously ill-fitting, uncomfortable baggy, boxy, and lacking in design and functionality, basically, only focused on performance. But back in 2013, Heather Hasson and Trina Spear started the company. They made some form-fitting comfortable scrubs and that they sold directly to healthcare professionals in the hospital parking lots out of their cars. This is obviously an industry that was right for disruption. To give you a big picture, between 2017 and 2020, FIGS grew its revenue at a compound annual growth rate of 146%.

Now, last year, revenue growth surged to 138% and the company was already profitable. Now, this year, it has slowed down just a little bit. Net revenue was up 58% in the second quarter and the company has generated a loss so far this year, but the majority of that is the result of expenses related to its IPO. If you adjust that for these one-time expenses, net income actually grew 48%. Its customer base is growing. The number of active customers is up 79%. The company has $164 million in cash and no debt.

This is another recent IPO stock that I bought that I was pretty interested in when I first read about it. One of the things that really stands out is the fact that its customers are ambassadors for the product. It's a cult favorite among people that wear FIGS scrubs. This is one where the word of mouth is really driving use of the product and one that I'm pretty excited about.

Matt Frankel: I know we're running short on time, but I have to chime in on FIGS. My wife is currently doing a 12-hour shift running a COVID ICU. Not a week goes by where an envelope from FIGS doesn't show up on our doorstep. This is a massive opportunity. I made the mistake when I first looked at the IPO of thinking this was a niche product. There are about 10 million healthcare workers in the U.S. and 59 million worldwide. And they order scrubs much more often than you might think.

Matthew Frankel, CFP has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

Figs Stock Quote
Figs
FIGS
$7.79 (2.50%) $0.19

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