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Uniform industry ‘not seeing’ major retail slowdown, FIGS CEO says

FIGS CEO Trina Spear joins Yahoo Finance Live to discuss company earnings, modernizing the medical-apparel industry, supply chain woes, consumer demand, inflation, and profit growth.

Video Transcript

[AUDIO LOGO]

BRIAN SOZZI: What a powerful spending slowdown, folks. Health care apparel player FIGS rolled out-- rolled right along in the second quarter with sales up 20.9% from the prior year. Let's dive more into this growth story with FIGS co-founder and CEO Trina Spear. Trina, good to see you in person for a change.

TRINA SPEAR: Thank you so much for having me. It's awesome.

BRIAN SOZZI: Your title changed a little bit. Talk to us a little bit about that.

TRINA SPEAR: I mean, not really. It went from co-CEO to CEO and natural progression for where we are as a company.

BRIAN SOZZI: So what are you focusing on inside the company now?

TRINA SPEAR: Continue to focus on our strategic vision, hiring the best-- we have the best team-- focus on making the lives of health care professionals better, and continuing to just execute on our overall growth strategies across the company.

JULIE HYMAN: So as Sozz pointed out in the intro to you, we have been covering just a lot of interesting inventory builds in retail, a lot of discounting, demand falling off in a lot of areas. You guys sell clothes, right? So talk to me about what you're seeing and why it is perhaps different from other segments.

TRINA SPEAR: Yeah, I mean, we operate in the uniform industry, right. And so health care professionals need their uniforms to go to work and do their job. So what we're doing is really selling non-discretionary products.

We're in a recession-resistant industry. And so our focus is to create really innovative products to sell direct to consumer. And so I think that's why it is a bit different. And we're not seeing a lot of what other players are experiencing.

JULIE HYMAN: I mean, it's non-discretionary, but at the same time, what about things like replacement cycle? In other words, like, you can stretch your scrubs a little longer. Yes, I'm sure they get quite a lot of wear and tear. But are you seeing any kind of slowdown in that replacement cycle as people are-- maybe don't have as much discretionary income?

TRINA SPEAR: Yeah, I think we're seeing a little bit of a difference in the repeat replenishment, right. But since the beginning of when we started the company, right, health care professionals come back over and over and over again to replenish their scrubs and other products. And so we've seen the repeat frequency go down a bit. But what we see is when they come, they're actually spending more. So a really important metric that we look at is revenue per customer, and that continues to go up and to the right.

BRIAN SOZZI: I'm a bit of a [INAUDIBLE] nerd. I've told you this before. And on your last earnings call, you teased at some things coming in the back half of the year. What else are you guys working on?

TRINA SPEAR: So really innovative, exciting products. I mean, we really don't design just anything, right. We design to solve problems for our community. And so we talked a little bit about extended sizing.

This is a really exciting-- something that we've been working on for a very long time. And we're finally going to be bringing 3 XL to 6 XL across both men and women in a number of styles and colors. So we're really excited about that.

We just launched PIPS, which is really cool. So it's essentially taking the pressure off your ear. So when you're wearing a mask, you actually pin it to your scrub cap or your headband, and that's been an amazing innovation for our community. So we're continuing to innovate. We're continuing to bring exciting introductions to the market.

BRIAN SOZZI: What about life after the hospital or the nurse's office, doctor's office, what else does the customer need? What else do you see them saying, hey, we want this from you?

TRINA SPEAR: You know, I think it's what are they wearing under their scrubs? What are they wearing over their scrubs? So our outerwear has been an incredible category for us, right.

You know, you're not-- fleeces made to go hiking is very different than the fleece that you're wearing inside of a hospital, right, that has a pocket for your stethoscope and your alcohol swabs and your keys and all the things that you need on a 16-hour shift running around a hospital, right. It's really different. And so we're going to continue to create products that are made for the types of climates you're in, in any health care institution.

JULIE HYMAN: Talk to me about supply chain for you guys. Where is your stuff made? How has the sourcing been going and the price-- your input costs been going as we've seen prices for everything go up?

TRINA SPEAR: Yeah, I mean, I think that's another really important aspect of FIGS, right. We're in over 40 countries. We're in-- sorry-- we're in 15 countries, over 40 facilities, right, and so really diversified supply base. And we're in the uniform industry.

So it's all year round, we're able to keep the lines of our manufacturers moving, our nonseasonal business, right. And so-- and we-- 13 core styles make up over 80% of our revenue, right. And so manufacturers love working with us, and we continue to see we're able to get leverage across our supplier base.

BRIAN SOZZI: I saw some-- a recent headline, Trina, calling you the Lululemon of health care apparel. Do you like that comparison? Is it a fair one?

TRINA SPEAR: I don't hate it, right.

[LAUGHTER]

I'll take it. You know, Lululemon's an incredible business, incredible company. And so not mad about being compared to them.

JULIE HYMAN: Well, the guy who said that, to be clear, was Ron Baron, who is a big-time investor who's invested in the company. You have some other notable hedge funds. I think Soros Fund Management also has a stake in FIGS. Are you engaging with these folks? Are you hearing from them as you're running the business?

TRINA SPEAR: Yeah, I mean, we talk to our investors all the time. I think really giving love-- we call it FIGS love, right, whether it's our community, our customers, whether it's our investors, whether it's obviously to our employees, you know, that philosophy holds true of really telling our story and having people understand what we're doing because we have an incredible business. And it is different than a lot of the companies that maybe you're meeting with and talking to.

So it's really about getting our story out there. And over time, I think people will get it. And if anything, you know, it's very interesting. About a year ago, right, we're close to an $8 billion company.

And now you see where we are trading today. Nothing has changed. If anything, we're bigger. We have more innovative products. We're connecting more deeply with our community. And that's what we're going to continue to do.

BRIAN SOZZI: Do you ever want to get out of the health care space? Because we joke-- I just say it all the time, like, I want to wear this stuff, like, it just looks really nice on the site.

JULIE HYMAN: Sozzi wants you to make clothes--

BRIAN SOZZI: I really--

JULIE HYMAN: --for him specifically.

BRIAN SOZZI: I really do.

JULIE HYMAN: That's what he's asking you to do.

BRIAN SOZZI: I want to go see a doctor wearing these clothes. I'm confident they can save me. I mean, I'm just being full-on honest with you. I mean, do you see yourself branching out at some point? I mean, not talking making puffer coats, but where else do you see this company in five years?

TRINA SPEAR: You know, I think that's a really exciting thing is that uniform industry overall, it was broken within health care. It's broken in a whole host of other types of industries, hospitality, and chef, and fire, police, et cetera. And so the uniform industry overall, if anyone's going to bring comfort and functionality and bring really--

BRIAN SOZZI: So you're going to-- I'm sorry. You're going to remake the police uniform.

TRINA SPEAR: You never know. You never know.

JULIE HYMAN: Well, here's-- I mean, one--

TRINA SPEAR: It's such a [INAUDIBLE]

JULIE HYMAN: --final little thing.

TRINA SPEAR: --right? You know--

JULIE HYMAN: Yes, for sure. But just as we think about the scrubs industry, like, what is different about FIGS? Like, why is it so-- why are your scrubs so great? I mean--

BRIAN SOZZI: It looks soft as hell.

JULIE HYMAN: No, but-- well, they look-- but you-- I'm just saying, like, what did you guys do that all the other scrubs companies couldn't do?

TRINA SPEAR: Yeah, I mean, I think it starts with fabric, right, really bringing fabric that's both comfortable and technical. No one had really done that before. You know, you're on a 16-hour shift. You're saving lives. You're helping patients. You're-- many are curing diseases.

I mean, it's a really intense job. And you needed something that actually helped you perform but also wasn't, like, too stiff and wasn't comfortable. And so there's that combination that really changed the game.

And then I think functionality, having pockets with zippers to hold all the things that you're carrying around, especially as an RN, NP, PA, all the different professions that we serve. So I think that's a big piece. And then the brand, right, connecting with this community.

And there was no brands that really showed up and said, we're here for you. We have your back. And so we're the first company that really did that. So I think it's all of it. And we've built a very authentic brand building the best product. We don't make it if it's not the best. And we've done that over 10 years, and we're going to continue to do that over the next 100.

BRIAN SOZZI: Me and Julie, we save portfolios, so please get us-- hook us up with some kind of jacket here. Design something for us. Congrats on all your success. We look forward to continuing to follow your journey. FIGS co-founder and CEO Trina Spear, good to see you, as always.