Nearly $35 Million of Funkos Are About to Be Dumped in a Landfill
Does it ever seem like there are just too many Funko Pops out there for the market to possibly find homes for all of them? Turns out you're right. Yeah, there are some expensive rarities on eBay, but at present, there are also more than $30 million worth of the little plastic collectibles about to be dumped into the trash. The amount, which is based on a huge inventory growth year over year and suggests Funko made more than they could sell in 2022, was so much bigger than expected that the company's stock took a hit on the news.
This morning, shares of Funko are sitting at $9.94. That's down 76 cents (or 7.1 percent) from yesterday. This isn't new, though; CEO Brian Mariotti is dealing with a company that has been struggling for a while, with huge cash overruns from trying to manage its excess inventory.
"Inventory at year-end totaled $246.4 million, an increase of 48% compared to a year ago," the company said in a statement on Wednesday. "This includes inventory that the Company intends to eliminate in the first half of 2023 to reduce fulfillment costs by managing inventory levels to align with the operating capacity of our distribution center. This is expected to result in a write down in the first half of 2023 of approximately $30 to $36 million."
Net sales last year were up about 1.3%, which translates to an overall sales figure of $1.3 billion, according to that same press release. That's about the only good news, although they have targeted around $150 million in cost savings for 2023, which is promising. Some of that money, though, is going to come from filling the ground with plastic as the company sheds the cost of shipping containers that were keeping the inventory on hand.
If you boil it down to just numbers, things sound grim. According to Funko, they have about $20 million in liquid assets (cash and cash equivalents on hand), with their inventory valued at $246.4 million. That inventory is up 48% from last year, so they're going to dump a bit over 10% of it, somewhere between $30 and $36 million.
At the same time, their total debt is estimated at $245.8 million -- roughly the same amount as their inventory and more than ten times what they currently have on hand to pay bills with.
"Funko is highly focused on identifying and addressing opportunities for improvement," the company said. "Our areas of focus, gross margin opportunities, fulfillment costs, and other SG&A, will position the Company to drive sustained long-term shareholder value. However, 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."