Why Figs Stock Crashed Today
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.
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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.
