Funko (FNKO) Pop! figures, those big-headed, vinyl pop-culture dolls, are currently valued at $30 million, and will soon enter the hands of a new collector: the garbage collector.
According to the company’s earnings report for the fourth quarter, Funko is having financial difficulties due to declining demand for the toys and an excess of inventory. With such a high demand for Funko toys, from Baby Yoda to Eddie Van Halen, the company had to rent extra storage space last year.
At the close of 2022, Funko had dolls worth about $246.4 million in inventory. That’s a 48% increase over the stockpile size from the previous year.
To “reduce fulfillment costs by managing inventory levels to align with the operating capacity of our distribution center,” Funko said in a statement on Wednesday, it plans to “eliminate” some of its nearly $250 million in inventory in the first half of 2023. This will likely cause a $30–$36 million write-down in the first half of 2023.
Short version: they’re getting rid of at least $30 million worth of product because its current value is less than the cost of storing it.
Last week, Funko CEO Brian Mariotti told investors on a call that the company’s distribution center in Arizona was so full of dolls that they had to rent additional storage containers. He claimed that the added expense of all that storage space was quickly draining the company’s cash reserves.
As a further cost-cutting measure, company executives said they would be eliminating 10% of the workforce.
In 2021, Funko’s net sales were $1 billion, a 58% increase from the previous year’s $600 million, thanks in large part to the pandemic boom.
In the last quarter of 2022, the company posted a net loss of $47 million. This is a decrease from the previous year’s profit of $17 million during the same time frame.
During the company’s most recent earnings call, “it was clear that the business and our operations hit an inflection point,” Mariotti said. Both external factors and internal problems at Funko have severely hampered the company’s ability to generate revenue and generate profits.
In 2018, investors have seen a 9.4 percent decline in Funko shares.