Fourth quarter Funko sales were down 13% to $291.2 million from $333.0 million in the year ago quarter. U.S. sales were down 18%; a 16.3% increase in sales in Europe partially offset the decline in U.S. and other international markets. The quarterly loss was $10.8 million, an improvement from the $42.2 million loss in Q4 2022.
Interim CEO Michael Lunsford attributed the bulk of Funko’s sales declines to "one particular wholesaler." "If you take those numbers out, our wholesale channel is not significantly off of where it would have been at this point," he said in the conference call.
Lunsford, who was brought in as a turnaround specialist, touted the company’s efforts to reduce inventory (which was down $127 million, over 50%, from the end of 2022), to cut the size of Funko’s workforce (see "Funko Cutting Employees"), and to exit unprofitable lines and SKUs (see "Funko Plans 30% Reduction in Products"), a move that ultimately resulted in the sale of its games division assets early this year (see "Goliath Acquires Funko Games Assets"). A group of Funko Games alumni have since formed a new design and development studio, Tempest Workshop (see "Funko Games Alums Form Tempest").
For 2024, Funko is concentrating on its direct-to-consumer sales, "an area we control and can grow profitably," as Lunsford put it. DTC sales were 26% of sales in Q4, and were up 30% from Q4 2022. Sales in 2024 are expected to be flat to down, with an increasing percentage made direct to consumers.
As the turnaround ends and the company looks ahead, the team brought in to do the heavy lifting is on its way out. CFO and COO Steve Steve Nave, who handled much of the operational change and inventory reduction at the company, is leaving as of March 15. And the company expects to announce a new CEO to replace Lunsford, who has been in an Interim role, in Q2.
