They say that “everyone is a fan of something,” and in the toy industry, everyone’s a fan of making money.
Funko reported its first quarter earnings today, beating Wall St. estimates despite a slowdown at retail. Net sales decreased 18% to $251.9 million vs. $308 million in the Q1 of 2022 as Funko battled the same challenging retail environment that the greater toy industry has faced this year.
While a slowdown in retail orders made a big dent in Funko’s core collectibles business, the company’s own direct-to-consumer business spiked 61% fueled by new product offerings and an updated e-commerce infrastructure.
“We are off to a strong start in 2023, with progress on our cost-savings initiatives and continued innovation in our product lineup,” says Funko CEO Brian Mariotti. “Enthusiasm for the brand remains strong, highlighted by our 61% sales increase in our direct-to-consumer channel, the success of our recent product launches, and the early promise of our recent commercial partnership with Fanatics.”
Funko’s net loss increased a whopping 521% to $61.1 million as it continued making adjustments to the overall business operations. Through the end of March, Funko’s inventory levels remain elevated over Q1 2022 but are down nearly 23% following a tough holiday season.
“We have made strong progress in reducing costs and right-sizing our business,” adds Steve Nave, Chief Financial Officer and Chief Operating Officer. “We are raising our full-year adjusted EBITDA outlook due to that progress, but revising our net sales outlook to reflect the well-documented retail inventory destocking. While Funko’s success, built on fan enthusiasm, has shown resilience to volatility in the broader market, we are not immune to these external factors in the short term.”
The company says that the recent introduction of the Bitty! Pop micro collectibles range is “one of the strongest launches in company history” and its recent deal with Fanatics is showing promise as Funko moves further into sports collectibles.
Looking ahead, Funko raised its outlook for the year with expectations of a 5-10% decrease in net sales.
