Creativity is not a problem at Funko, but profitability is.
That was one key takeaway from the Washington-based pop-culture toy, game, and lifestyle company’s second quarter earnings call this afternoon.
Net sales slid 24% to $240 million in versus $315.7 million in Q2 last year. The core collectibles business dipped 25.5% while the typically unstoppable Loungefly division declined by 28.5%. The one bright spot was a 28.8% net sales spike from the company’s “other” brands, which includes Funko Games.
Recently appointed Interim CEO Michael Lunsford says that net sales and an adjusted EBITDA loss were within the company’s guidance, but that inventory adjustments by some of its larger U.S. wholesalers have made an impact on topline and profitability. Due to anticipated continued softness in the back half of the year, Funko reduced its guidance with sales expected to land in the $1.05 billion to $1.12 billion range versus a previously expected $1.19 billion to $1.26 billion range.
We have also begun re-shaping the company to focus our energies and resources on Funko’s core products. To that end, we are implementing a strategic plan to reduce the number of product lines and complexity in our business. Putting our fans and brand first, running the business like a lean startup and investing in areas where we can grow profitably, will guide and inform every decision we make."
In Q2, Funko logged a net loss of nearly $73 million versus a profit of $24 million in Q2 last year.
The company recently revealed plans to implement layoffs affecting approximately 12-13% of its workforce, a move that follows a previous reduction earlier this year. Lunsford stepped into the CEO role last month following the news that Brian Mariotti has taken a leave of absence and stepped down from his post.
“Looking out a bit further, we see our financial performance rebounding in 2024, based in part on a full year of benefit to our gross margin and cost structure from our improvement efforts, the launch of Pop! Yourself, currently planned for later this month, and a return to more normalized sales to our wholesale customers,” Lunsford adds.
No word yet on which product lines are being discontinued, but the company said on its earnings call that the recent layoffs were related to the products that are being discontinued.
Sales from products sold during Funko’s recent return to Comic-Con International: San Diego (SDCC) last month will be reported alongside Q3 earnings.
