Spruce Point says scrubs maker Figs overstated revenue, issues 'strong sell' rating
07/09/2022 15:23
Sept 7 (Reuters) - Shares of Figs Inc FIGS.N fell about 4%
on Wednesday after short seller Spruce Point Capital Management
LLC alleged the medical apparel and scrubs maker exaggerated key
financial metrics and said it expects the company to fall short
of its growth targets.
The New York-based investment management firm also issued a
"strong sell" rating on Figs' stock, saying the shares face a
downside risk of around 45% to 60%.
Spruce Point claimed Figs has a history of reporting
inflated financial metrics, including overstating its revenue
figures, gross margins and its total addressable market
potential.
Figs did not immediately respond to a Reuters request for
comment.
Figs, which sells medical scrubs for healthcare
professionals, benefited from the COVID-19 pandemic, with its
revenues surging 60% to $419.6 million in 2021.
However, its fortunes are fading, Spruce Point said, adding
there are growing signs of financial and business strains due to
increasing competition and that Figs is likely to fail to
achieve its growth targets.
"We believe Figs' financial performance and growth
aspirations will fail miserably during an environment of greater
competition and investor scrutiny," Spruce Point said.
Figs, which went public in May 2021, last month reported net
revenues of $122.2 million for the second quarter, up about 21%
from a year earlier, but average order value slid to $109 from
$116 in the first quarter.
Spruce Point last year had alleged plant-based milk maker
Oatly Group AB OTLY.O used misleading accounting practices,
and issued a "strong sell" rating on footwear maker Skechers USA
Inc SKX.N in July, citing mounting financial pressures.
urn:newsml:reuters.com:*:nL4N2OQ3PN
(Reporting by Deborah Sophia in Bengaluru; Editing by Krishna
Chandra Eluri)
((DeborahMary.Sophia@thomsonreuters.com;))