Funko, Inc. beat expectations in the second quarter with a 49% decline in sales amid the spread of the COVID-19 pandemic. Heading into Q2, the company preemptively cautioned a decline of as much as 60% due to retail closures and the lack of live events.
“Although our second quarter results were significantly impacted by store closures in both the U.S. and abroad, we were able to accelerate our connection and engagement with our fans through continued innovation and new product introductions as well as the expansion of our direct to consumer business,” says Funko CEO Brian Mariotti. “In Q2, we saw strong performance on our own e-commerce sites which delivered triple-digit sales growth.”
The company quickly pivoted to a direct-to-consumer model for select items in the second quarter as it relaunched funko.com with an expanded product offering. According to Mariotti, more than 200,000 fans logged onto the site during the first minute of its Comic-Con @ Home sale which replaced the canceled Comic-Con International: San Diego (SDCC). Additionally, the company is seeing growth across Funko Games, the new Marvel Battleworld: Mystery of the Thanostones, and Loungefly’s new Stitch Shoppe offerings.
“Looking at the second half of the year we are excited to have our most diverse product offering in the market come this holiday season,” Mariotti says. “In the face of the highly dynamic environment, we are staying nimble and remain committed to our key growth strategies.”
In the second quarter, sales of Funko’s figures category — including its famed Pop! Vinyls — fell 52% in the quarter.
On a call with analysts today, Mariotti said that COVID-19 has had an opposite effect than the Toys “R” Us (TRU) bankruptcy, which was the last major ripple through the toy industry. While TRU had virtually no effect on Funko due to the diversity of its retailer base across mass and specialty, the specialty retailers — including independent toy stores, comic shops, gift shops, mall stores, and other sellers — had the most closures during the pandemic.
As Funko remains committed to diversifying away from its dependency on licensed goods, major movie releases are less of a concern in the back half of the year.
“We are looking at the second half of the year with the idea that no tentpole movies will be released,” Mariotti says, noting that much of the products sold this year have been evergreen.
One big exception on licensing is The Mandalorian. Funko says that it expects a massive tailwind when season two of the Star Wars series premieres on Disney+ in October. Mariotti promises that unlike last year’s surprise reveal to everyone — including licensees — of The Child (Baby Yoda), there are new products planned to be offered for the next season of The Mandalorian shortly after new episodes air.