FIGS: The Best Quarter in Company History — and the Tariff a Court Struck Down

There is an investor trap that springs precisely when everything looks good — the tailwind trap. It works like this: a company posts a brilliant quarter, and your brain automatically credits the crew. Nobody asks who made the wind. FIGS, Inc. (NYSE: FIGS) of Santa Monica delivered the best quarter in its history in the first three months of 2026: $159.9 million in net revenues against $124.9 million a year earlier, and $6.3 million in net income against a $0.1 million loss. But part of that wind blew in from Washington. In February 2026 the Supreme Court of the United States ruled that using the IEEPA emergency statute to impose tariffs was not permitted — and the tariff bill FIGS had calculated three months earlier at roughly 400 basis points of margin pressure for 2026 was suddenly a different bill. So let us make a deal: before you treat the quarter as proof of a better business model, we will read together what FIGS itself reported to the U.S. securities regulator, the SEC — the annual report (10-K) for 2025, the quarterly report (10-Q) as of March 31, 2026, and the proxy statement for the 2026 annual meeting. Those filings are honest under penalty of law. And they describe a real, growing brand, a $20 million tariff refund nobody has yet, 45.6 million options and share awards below the waterline — and 4.97 percent of the equity that carries 51.1 percent of the vote. In the end, you decide.

What FIGS Actually Does: A Brand for a Garment That Had None

If you have ever been in a hospital, you have seen the product without noticing it: the plain tops and trousers that nurses and physicians wear. They are called scrubs. For decades they were a commodity without a name — bought through hospital procurement or uniform shops, made of thin polyester, available in a handful of colors. FIGS, founded in 2013 by Heather Hasson and Catherine Spear, turned that into a brand: a proprietary fabric called FIONx, considered fits, limited-run color drops, and sales made directly through its own website and app to the people who wear the garment rather than to a purchasing department.

The company calls its customers Awesome Humans and describes its business model as dryly as only a mandatory filing can: it has "branded a previously unbranded industry and de-commoditized a previously commoditized product." Alongside scrubs FIGS now sells underscrubs, outerwear, lab coats, footwear and compression socks, grouped in the filings as non-scrubwear. In the first quarter of 2026, $126.6 million of revenue came from scrubwear and $33.3 million from non-scrubwear; geographically, $131.6 million came from the United States and $28.3 million from the rest of the world. Add five company-run stores that FIGS calls Community Hubs and a business-to-business arm named TEAMS. Manufacturing is outsourced: in 2025 finished-goods production was split "approximately evenly between suppliers in Vietnam and Jordan," with limited production in China and Peru. Remember this: FIGS is a branded apparel company selling online — the factories belong to somebody else, but FIGS pays the tariffs.

Two things make the business unusually resilient. First, workwear is a necessity rather than a wish: shift workers wear out their scrubs, and the filings explicitly describe the business as "largely non-discretionary, replenishment-driven." Second, there is almost no seasonality: unlike fashion retail, FIGS sells the same core items all year, with only the fourth quarter running higher because of promotions. The price of that model is that a brand premium on a basic garment has to be re-earned every year — through marketing, colors and newness. And that marketing rose 62.4 percent in the first quarter of 2026.

Where This Stock Landed on Our Desk

FIGS did not reach us through a price move but through a pattern. Our in-house stock scanner looks for companies whose reported earnings came in well above analyst expectations — the Big Earnings Surprise list. FIGS sits there at rank 44 of 81 U.S. hits, with an RS rating of 64, as of July 25, 2026. If you want to follow along, the list is public at Big Earnings Surprise; it is recomputed daily, so today's rank is not tomorrow's.

What sits behind the ranking is four consecutive beats (data as of July 25, 2026, against analyst consensus):

• First quarter 2026 (reported May 7, 2026): $0.03 against $0.02 per share — a 50 percent beat
• Fourth quarter 2025 (February 26, 2026): $0.10 against $0.02 — a 400 percent beat
• Third quarter 2025 (November 6, 2025): $0.05 against $0.02 — a 150 percent beat
• Second quarter 2025 (August 7, 2025): $0.04 against $0.02 — a 100 percent beat

Those numbers are real, but they need translation. A 400 percent surprise sounds enormous and is in fact an eight-cent gap: $0.10 instead of $0.02. For a company only just lifting off the zero line, the percentage surprise is close to meaningless — any one-cent deviation produces triple-digit percentages. So here is our first judgment: the streak is a genuine turn in earnings power, but its percentages are inflated. More interesting is what the market did with it. On May 7, 2026 the stock closed at $15.37; the day after the quarterly report it closed at $11.63, nearly a quarter lower, despite the beat. By July 24, 2026 the closing price stood at $9.51. An earnings surprise, in other words, is not a buy signal but a question: why did the market not celebrate it? The answer is in the filings.

The Numbers Across the Years — Honestly Credited

Let us start with what genuinely impresses. FIGS has grown in every single year since its May 2021 IPO — through the post-pandemic slump, through the inflation years, through the tariff turbulence:

In figures: $419.6 million (2021), $505.8 million (2022), $545.6 million (2023), $555.6 million (2024), $631.1 million (2025) — 50 percent more revenue across four years. Net income, by contrast, rode a roller coaster: minus $9.6 million (2021), plus $21.2 million (2022), plus $22.6 million (2023), plus $2.7 million (2024), plus $34.3 million (2025). The year 2024 was the low point: 1.8 percent revenue growth, gross margin down 1.5 percentage points, and $42.7 million of stock-based compensation that consumed almost the entire result. In 2025 the turn came: revenue rose 13.6 percent, stock-based compensation fell to $26.9 million, and $2.7 million of profit became $34.3 million.

Then came the first quarter of 2026. FIGS lists the headline numbers in the quarterly report itself:

The supporting numbers fit. Gross margin edged up from 67.6 percent to 67.7 percent, adjusted EBITDA rose from $9.2 million to $13.9 million, and active customers grew from 2.696 million to 3.024 million. Net revenues per active customer climbed from $208 to $220, and average order value from $119 to $124. International was the standout: $28.3 million against $18.9 million, roughly 50 percent more. And the balance sheet is one of the cleanest you will find at this size: $74.3 million in cash plus $202.7 million in short-term investments as of March 31, 2026 against $132.8 million in total liabilities, not one dollar of which is bank debt. The $100 million Bank of America revolving facility is untouched apart from $8.4 million of letters of credit and, since the second amendment of November 3, 2025, runs to November 3, 2030.

That is the tip of the iceberg, and it is real. Now we dive.

What the Filings Say

Uncomfortable Truth No. 1: A Court Rewrote the Margin Guidance — and $20 Million Is Still With Customs

On February 26, 2026 FIGS filed its annual report for 2025. It carried a clear warning: absent mitigation, tariffs would cut gross margin in 2026 by roughly 400 basis points, or four percentage points. For a company running a 66.5 percent gross margin that is a meaningful hit; in 2025 tariffs had already cost 120 basis points, and 260 basis points in the fourth quarter alone.

Two and a half months later, in the quarterly report of May 7, 2026, the same paragraph read differently. The reason was the Supreme Court ruling of February 2026.

"In February 2026, the United States Supreme Court ruled that the use of the International Emergency Economic Powers Act ("IEEPA") to impose tariffs was not permitted, invalidating a significant portion of U.S. tariffs that had been in effect since April 2025. … We have applied for a refund of approximately $20 million of IEEPA tariffs paid by us, however the ultimate extent and timing of such refunds remains uncertain."

— FIGS, Inc., SEC quarterly report 10-Q as of March 31, 2026, Recent Developments

Three things sit in that single paragraph, and all three matter for FIGS. First: the administration replaced the invalidated tariffs with a 10 percent global tariff under Section 122 of the Trade Act of 1974, limited to 150 days — effective February 24, 2026 and scheduled to expire on July 24, 2026 unless extended by Congress. An intention to raise the rate to 15 percent was expressed but not formally implemented. What has happened since May 7, 2026 appears in no FIGS filing: the next quarterly report is the first place where the company documents the actual state of play. Second: FIGS revised its own guidance downward — tariffs would still weigh on 2026 gross margin, "although to a lesser extent than we previously disclosed in our 2025 Annual Report on Form 10-K." Third: the $20 million applied for is money FIGS has already paid and wants back. It appears on no balance sheet line — and it equals 58 percent of total net income for 2025.

Why that matters for judgment: gross margin in the first quarter of 2026 came in at 67.7 percent, just 0.1 percentage points above the prior year — and FIGS attributes the increase to price increases and efficiency, "largely offset by higher tariffs and product mix shift." In plain terms: the operating improvement was almost entirely swallowed by tariffs. Remove the tariff and there is headroom. Bring it back, or raise it to 15 percent, and the headroom is gone. Anyone valuing FIGS today is also valuing a trade policy over which the company has no influence. A comparable case from the same tariff wave sits in our analysis of Hyster-Yale — there the bill ran to roughly $100 million, and there too a family holds the voting majority.

Uncomfortable Truth No. 2: A Quarter of Earnings Per Share Belongs to the Options

Dilution, in everyday terms, means your slice of the cake gets smaller because new guests arrive at the table — even though the cake itself has not shrunk. At FIGS the effect stayed invisible for four years, for an accounting reason: as long as a company reports a loss, options are removed from the earnings-per-share calculation because they would arithmetically shrink the loss per share. In the first quarter of 2025 that applied to 17,784,006 options.

In the first quarter of 2026 FIGS made a profit — and the options surfaced:

The weighted-average share count rose from 166,460,085 to 196,090,295 — plus 25.06 million from options and 4.57 million from restricted stock units. That is 17.8 percent more shares and earnings per share of $0.03 instead of $0.04. A quarter of earnings per share disappears into dilution.

The reservoir behind that single jump is larger. As of December 31, 2025 the proxy statement lists 37,791,945 options at a weighted-average exercise price of $4.09 plus 7,839,905 RSUs — 45.63 million instruments against 165.84 million shares outstanding, roughly 27 percent. Another 9,264,545 instruments remained unissued, and the equity plan pool grows automatically every January 1 by up to 5 percent of shares outstanding. To place that exercise price: $4.09 sits far below the $11.36 closing price on December 31, 2025, so these options are deep in the money and very likely to be exercised. FIGS pushes back with buybacks: in the first quarter of 2026 it repurchased 571,592 shares for roughly $8.8 million, leaving $43.2 million of the $100 million authorization as of March 31, 2026. Do the arithmetic: $8.8 million of buybacks in a quarter against an option stack that would bring roughly $155 million of exercise proceeds into the cash box while creating 37.8 million new shares. The buyback slows the dilution; it does not reverse it.

Uncomfortable Truth No. 3: 4.97 Percent of the Equity Holds 51.1 Percent of the Vote — With a Switch to 82.7

FIGS has two classes of stock. Class A, which trades on the New York Stock Exchange, carries one vote per share. Class B, which does not trade, carries twenty. As of the annual meeting record date of April 8, 2026 there were 158,761,109 Class A and 8,283,641 Class B shares outstanding. Class B therefore accounts for 4.97 percent of the equity — and, per the proxy statement, 51.1 percent of the voting power. FIGS is formally a controlled company under New York Stock Exchange rules and exempt from parts of the governance requirements; the proxy states plainly that stockholders "may not have the same protections" as at other companies.

On its own that would be unremarkable for a recent U.S. listing. What is unusual is the mechanism above it — a contract dating from the IPO:

"As of April 8, 2026, Mses. Hasson and Spear retain the Exchange Right over a remaining 10,236,060 and 18,831,060 shares, respectively, underlying outstanding options."

— FIGS, Inc., SEC proxy statement DEF 14A 2026, "Equity Award Exchange Agreement"

Follow that to its conclusion — and the proxy statement does the arithmetic itself: if both founders exercised their options and exchanged the resulting Class A shares fully into Class B, they would together hold 82.7 percent of total voting power, with Catherine Spear alone at 69.6 percent and Heather Hasson alone at 49.5 percent. Both are additionally bound by a voting agreement that secures their mutual election to the board. Class B converts automatically into Class A only on June 1, 2031 — ten years after the IPO.

None of this is a scandal, and all of it is disclosed. But it is a fact with a price tag: anyone buying FIGS stock buys economic participation without control. A takeover against the founders' wishes is effectively impossible until 2031; an activist pressing for cost discipline or capital returns has no lever. If that troubles you, it should trouble you before the purchase rather than after.

Uncomfortable Truth No. 4: The Growth Cost 62 Percent More Marketing — and Free Cash Flow Turned Negative

Free cash flow is the money actually left after operations and investment — the most honest figure any income statement has to offer. At FIGS it swung from plus $7.9 million to minus $5.6 million in the first quarter of 2026, even as net income rose from minus $0.1 million to plus $6.3 million. Cash from operations fell from plus $9.2 million to minus $3.2 million. How do those go together?

Partly through working-capital timing: inventories rose $11.4 million in the quarter, accounts payable fell $10.6 million, and accrued compensation fell $12.3 million as 2025 bonuses were paid out. That is timing, not lost substance. The structural part sits beside it:

"Marketing expense increased by $11.3 million, or 62.4%, for the three months ended March 31, 2026, compared to the prior year period … The increase in marketing expense as a percentage of net revenues was primarily driven by our 2026 Winter Olympics campaign, partially offset by leverage on higher net revenues."

— FIGS, Inc., SEC quarterly report 10-Q as of March 31, 2026, Operating Expenses

Marketing thus jumped from 14.5 percent to 18.4 percent of net revenues. That is the decisive question for the coming quarters, and it fits into one sentence: did FIGS buy 28 percent growth, or earn it? In favor of earned: selling and administrative costs each fell by 3.4 percentage points of revenue in the same quarter, and the customer base grew 12.2 percent. In favor of bought: the Olympics campaign is a one-off. Without it marketing would hardly have risen by $11.3 million, and without those $11.3 million operating income would have been roughly $15.8 million instead of $4.5 million. The honest answer is both — and the first quarter without an Olympics will show the proportion. One more item belongs here: the effective tax rate in the first quarter of 2026 was just 2.4 percent against 105.5 percent a year earlier, thanks to a tax benefit from stock-based compensation. A meaningful share of the $6.3 million in net income therefore came from a tax effect tied to the share price at vesting — which is not something a company can plan.

Valuation: What FIGS Costs on the Exchange

First, an honest note on why this section shows a range rather than a single figure. FIGS had 167,047,253 shares outstanding as of April 30, 2026 (158,763,612 Class A plus 8,283,641 Class B). The most recent trading price documented in an SEC filing comes from an insider report: on April 2, 2026 Catherine Spear sold 62,335 Class A shares at $14.44 to cover taxes on vested restricted stock units. The closing price on July 24, 2026 was $9.51. Between those two dated anchors lies a third of the value — the stock fell sharply in under four months. Both figures are documented; neither is more correct. So we use both.

• Market capitalization: roughly $1.59 billion (July 24, 2026) to roughly $2.41 billion (April 2, 2026).
• Price-to-sales: against $666.1 million of trailing twelve-month revenue, roughly 2.4 to 3.6. For a branded apparel company with 66 to 68 percent gross margins and double-digit growth that is no bargain, but no bubble either — unbranded apparel retailers trade at 0.5 to 1, premium brands with comparable margins at 3 to 5.
• Price-to-earnings: on $0.22 of trailing twelve-month diluted earnings per share, roughly 43 to 66. That is expensive, and it shows how thin the earnings base still is. Against the analyst estimate for 2026 of $0.27 per share it works out at roughly 36 to 54.
• Enterprise value: roughly $1.3 billion as of July 24, 2026, because $277.0 million of cash and short-term investments comes off and no financial debt sits against it. Roughly 17 percent of the market capitalization is simply money.
• Book value: $430.6 million of stockholders' equity as of March 31, 2026, or $2.58 per share — a price-to-book ratio of roughly 3.6 (data as of July 25, 2026).

The professionals are notably cautious: of ten covering firms, as of July 25, 2026, one rates the stock a buy, seven a hold and two a sell. The average price target sits at $17.63, well above the last closing price — a combination worth noting but not reading as a forecast, since targets are updated less often than ratings, and the stock lost roughly 44 percent between its 2026 high of $17.12 on March 2, 2026 and July 24, 2026. For the current year the consensus expects $729.0 million of revenue, up 15.5 percent. How quickly a strong brand can still end up in the bargain bin is something we saw at Deckers — there too record numbers stood against a falling share price.

Opportunities and Risks at a Glance

What speaks for FIGS:

• Genuine brand strength in a niche that previously had none: 3.024 million active customers as of March 31, 2026, up 12.2 percent, $220 of revenue per active customer, and gross margins of 66 to 68 percent — figures normally reserved for luxury labels in apparel.
• Demand that barely tracks the economic cycle: shift workers wear out their scrubs and replace them, and the filings describe the business as "largely non-discretionary, replenishment-driven."
• A debt-free balance sheet: $277.0 million of cash and short-term investments as of March 31, 2026, $430.6 million of equity, no drawn borrowings, and a $100 million facility running to November 3, 2030 — roughly 17 percent of the market capitalization is cash.
• Growth headroom internationally and in the business-to-business arm: international revenue rose from $18.9 million to $28.3 million in the first quarter of 2026, roughly half again, and still accounts for only 17.7 percent of the total.
• A possible one-time gain from the tariff refund: $20 million would equal 58 percent of total 2025 net income — and since it appears on no balance sheet line, nothing is lost if it never arrives.

What speaks against it:

• Dilution of roughly 27 percent: 37,791,945 options at a weighted-average exercise price of $4.09 plus 7,839,905 RSUs as of December 31, 2025 against 165.84 million shares outstanding. In the first quarter of 2026 that cut earnings per share from $0.04 to $0.03. The buyback of $8.8 million in the quarter slows it but reverses nothing.
• No control for capital providers: 4.97 percent of the equity carries 51.1 percent of the vote, and the exchange right could take the founders to 82.7 percent. Automatic conversion arrives only on June 1, 2031.
• Tariff and supply-chain risk at the core of the business: production in 2025 was split "approximately evenly" between Vietnam and Jordan; the 10 percent Section 122 tariff was scheduled to expire on July 24, 2026 per the quarterly report, and an increase to 15 percent was announced but not implemented. FIGS has no influence on any of it.
• Earnings quality: the effective tax rate in the first quarter of 2026 was 2.4 percent against 105.5 percent a year earlier, thanks to a share-price-dependent tax benefit from stock-based compensation. And free cash flow swung from plus $7.9 million to minus $5.6 million despite the jump in net income.
• A valuation with little cushion: price-to-earnings of roughly 43 to 66 on trailing twelve months, price-to-sales of 2.4 to 3.6, and ten covering firms at one buy, seven holds and two sells as of July 25, 2026. Add a legal overhang: the dismissed IPO-related class action is on appeal, with oral argument scheduled for July 7, 2026.

A Human Conclusion

Back to the tailwind trap. Its core is not that FIGS is a bad company — quite the opposite. Somebody here turned a garment nobody took seriously into a brand that three million people identify with, at gross margins apparel retailers dream about. The core of the trap is that a brilliant quarter spares you the question of what it is made of. At FIGS it is made of at least four parts: real customer growth of 12.2 percent, a one-off Olympics campaign worth $11.3 million of extra marketing, a share-price-dependent tax benefit, and a court ruling in Washington that rewrote the tariff bill. Three of those FIGS controls. One it does not.

And below the waterline sits the part that is unimpressed by any single quarter: 45.6 million options and share awards at an average price of $4.09, which spread every future dollar of profit across more heads — and a voting structure in which your share participates in the earnings but not in the decision. So the honest question is not "was that a good quarter?" It was. The question is: are you paying for a brand that grew 28 percent, or for a quarter in which four favorable things happened at once — and are you willing to sit through it without a meaningful vote until 2031? If yes, you have a thesis. If no, you had a headline. The decision is yours.

Sources

Every original document used in this analysis, so you can read it yourself:

• FIGS, Inc. — SEC quarterly report 10-Q as of 03/31/2026 (filed May 7, 2026)
• FIGS, Inc. — SEC annual report 10-K for 2025 (filed February 26, 2026)
• FIGS, Inc. — SEC annual report 10-K for 2024 (filed February 27, 2025)
• FIGS, Inc. — SEC proxy statement DEF 14A for the 2026 annual meeting (filed April 23, 2026)
• Catherine Spear — SEC Schedule 13D/A No. 10 (filed May 12, 2026), source of the documented trading price of April 2, 2026
• Complete SEC filing history for FIGS, Inc. (CIK 0001846576): EDGAR overview (sec.gov)
• Fundamental data (metrics, valuation, analyst consensus, earnings surprises; data as of July 25, 2026, closing prices through July 24, 2026), reconciled against the SEC filings.
• Hook: our in-house stock scanner, the Big Earnings Surprise list (rank 44 of 81 U.S. hits, RS rating 64, as of July 25, 2026; recomputed daily).

Transparency & disclaimer: This analysis is journalistic commentary on publicly available information. It is not investment advice, not a regulated financial analysis, and not a solicitation to buy or sell securities. Equity investments carry substantial risk up to and including total loss. All information is provided without warranty; the data cutoff is noted in the text. The author holds no position in FIGS shares at the time of publication.