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Funko's third quarter earnings report shows huge losses
The collectible company's attempts to cut product lines and inventory haven't yet translated into profit.
Funko might have one of the most recognizable figurine brands on the planet, but that hasn’t helped their balance sheet much over the past several years. Despite plans to drastically reduce their inventory and streamline their production process, the company continues to face tough losses. In their earnings report for investors in the most recent financial quarter, Funko disclosed that sales were down considerably compared to the same time last year.
Funko reported total sales of $312.9 million, which is down 14.4% from the previous year. The total loss was $15 million, following a $73 million loss in the second quarter and a $61.1 million loss in the first quarter of this year, painting the picture of a pretty disastrous year for the company.
There is a lot to unpack here. It is pretty easy to see that Funko is currently bleeding money. Despite continuing to have a presence at most conventions in the US and abroad, Funko still hasn’t managed to turn sales around after the post-pandemic drop-off. However, these dire numbers are actually better than the company expected, causing them to change their projections going into the all-important holiday season. There was a bright spot hidden in the report, however – Direct-To-Customer sales were up 32% from the year before, accounting for 17% of total sales.
Most of Funko’s problems stem from the pandemic, when they saw demand for their product skyrocket as people sought to decorate their homes with the company’s signature Funko Pop! figurines. However, the sudden drop in sales meant they were stuck with several warehouses full of inventory that no one was buying. To try to correct direction, the executives have worked on reducing their inventory and cutting back on the total number in their production line. They also wrote off large numbers of figurines in an attempt to balance their books but they clearly have a long way to go to clear out the excess inventory.
Previously, Funko had announced a plan to reduce the number of products they sell by 30%. This means that the days of Funko producing Pop figurines of everything under the sun are probably over. They’re largely trying to focus on core products and top sellers to decrease the complexity of their production process, according to interim CEO Michael Lunsford said a conference call with investors.
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