Funko's stock rallies, but toy maker sees Red Sea disruptions, Hollywood strikes as headwinds ahead

By Claudia Assis

Funko beats expectations for its fourth quarter, and stock rallies more than 15%

Funko Inc. shares rallied more than 15% in extended trading Thursday after the maker of collectible figurines swung to a surprise quarterly profit and its sales topped expectations.

Tucked into the report, however, were a couple of red flags for the year, in which the stock already lost nearly 17%.

Funko (FNKO) reported fourth-quarter adjusted earnings of a penny a share on sales of $291 million. Analysts polled by FactSet expected the company to report an adjusted loss of 2 cents a share on sales of $282 million.

The company praised growth for its direct-to-consumer business and said that it completed the "major elements" of a cost-reduction plan, including cutting down on expenses and addressing unprofitable product lines and inventory issues.

Funko "is now on a significantly more solid foundation upon which we intend to build and grow," interim Chief Executive Michael Lunsford said in a statement.

Looking ahead, however, challenges will include a "softer" content schedule after last year's Hollywood strikes cut down on the number of new releases and "uncertainty around shipping costs caused by the Red Sea situation," Funko said.

Despite those headwinds, Funko said it expects profits to improve this year, thanks to expanding the direct-to-consumer business and focusing on customizable and limited-edition figurines, "areas we control and can grow profitably," Lunsford said.

Funko also said that Chief Financial Officer Steve Nave is resigning effective March 15. Deputy CFO Yves LePendeven will serve as acting CFO after that, the company said.

Funko shares have fallen about 17% so far in 2024, contrasting with gains of about 8% for the S&P 500 index in the same period. The shares have dropped 31% in the past 12 months, versus gains of 29% for the broader index.

Funko's previous CEO Brian Mariotti announced in July he was taking a leave of absence. Mariotti was brought back to be the figurine maker's CEO in December 2023 amid concerns about falling sales.

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-Claudia Assis

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03-07-24 1743ET

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