Funko to discard at least $30M in inventory

Fariha Alam

Funko Inc., a pop culture-centered consumer products firm, announced it will discard between $30 million to $36 million worth of its “Pop!” figurines.

According to the fourth quarter earnings report for its 2022 fiscal year, the company made the decision as part of its drive to minimize surplus inventory and focus on newer and more popular items.      

“Funko is highly focused on identifying and addressing opportunities for improvement,” the company said in a press release, adding that “ these initiatives will take several quarters in some cases, and as a result, we expect sequential improvement throughout the year as our initiatives take hold.”

Since the business launched in 1998, Funko has become well known for its diverse line of pop culture-themed consumer goods. These commodities include collectable figurines such as bobblehead figures and plush toys.

In 2010, the company released its first collection of “Pop!” vinyl figurines.

The line immediately became a substantial source of revenue. The figures helped the company increase its net sales in 2018 by 33% to $686.1 million. In comparison, the company generated $425.6 million from sales in 2016.

“This rapid growth brought challenges that we’re now addressing,” Funko CEO Brian Mariotti said during an earnings conference call.

Funko’s “Pop!” figures have been well received by customers.

Fans of pop culture, including popular franchises of movies, television, video games and sports, have collected figurines of their favorite characters and media personalities. Fans have also lined up to acquire new releases and uncommon editions of the figurines, which have been deemed as collectibles. 

Despite its success, Funko reported a surplus in its inventory. According to the earnings report, the company intends to “eliminate” surplus inventories by the end of the first half of the current fiscal year.

During the earnings conference call, Funko Chief Operating Officer Steve Nave said the company will have the goods destroyed by a third-party company in Arizona, where the warehouse that stores the excess inventory is located.

“It was clear on our last earnings call that the business and our operations hit an inflection point,” Mariotti said, according to CNN. “A combination of macro factors and Funko-specific issues have disrupted our financial and operating performance to an unacceptable degree.”

Funko reported that its debt was valued at $245.8 million at the end of 2022, which is up 42% from the same time in 2021. Sales of the company’s figurines declined 6.6% between the fourth quarters of the 2022 fiscal year and the 2021 fiscal year.

The cut in inventory indicates that customer demand has switched away from specific items, resulting in overstocking. To preserve their development and profitability, businesses like Funko will shift to focus on trends and the needs of customers.

Additionally, Funko reported that its sales in the United States decreased by 4.7% between the fourth quarters of the 2022 fiscal year and 2021 fiscal year. The company cited “slower retail restocking” as the cause in its earnings presentation.

Licensing deals with large entertainment brands such as Harry Potter, Marvel and Star Wars were a primary source of revenue growth for the organization. The firm intends to focus on its “core collectibles” while branching out into other sectors such as board games and nonfungible tokens.

Funko, which went public in 2017, saw its stock price fall 1.1% on March 6, with shares priced at $9.75.