Key Points
Figs beat on sales and beat on earnings last night. Today, it sold off anyway.
Guidance calls for Q1 sales growth to slow dramatically later in the year.
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Pull out the crash cart -- Figs (NYSE: FIGS) is on life support.
The popular purveyor of medical and surgical scrubs and other apparel took a huge tumble on Friday, crashing 29.4% through 10:40 a.m. ET despite beating analyst forecasts for both sales and earnings last night.
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Heading into its Q1 report, analysts forecast Figs to earn $0.01 per share on $152.5 million in sales. Figs actually earned $0.03 per share and reported sales of $159.9 million.
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Figs Q1 earnings
So good news, right? Investors should be happy? Except they aren't -- and guidance seems to be the reason.
In Q1, Figs grew sales a strong 28%, with scrubwear sales up 27% and non-scrubwear up an even better 31%. Figs improved its gross profit margin (albeit only by 0.1%). It grew operating costs slower than sales (up only 23%). Figs even flipped from a small net loss a year ago, to $0.03 in profits this time -- an earnings growth rate of infinity!
But when it came time to give guidance, the most Figs would promise for 2026 was sales growth of 14% to 16%.
Is this good or bad for Figs?
I get why investors are spooked. Figs grew 28% in Q1, but promised barely half that growth over the course of the rest of the year -- but here's the thing:
Wall Street is only expecting Figs to grow its sales by 12% this year. Investors may be upset that 14% is less than 28%, sure. But it's also comfortably ahead of 12%, and that means Figs just promised to beat earnings this year.
That sounds like good news to me. If it were a lot cheaper than its current 73.5 price-to-earnings ratio, I might even buy Figs stock.
Should you buy stock in Figs right now?
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Rich Smith 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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
