Funko Will Destroy Figurines After Decreased Toy Demand

By Brendan Menapace

Funko, the company known for their Pop toy figurines, which depict athletes, movie characters, bands, pretty much any pop culture figure in history, reportedly plans to "eliminate" between $30 million and $36 million in its figurines due to decreasing demand in toys.

Yahoo Finance reported that Funko's most recent earnings report showed $246.4 million in inventory at the end of 2022, a 48% increase over 2021. With that in mind, the company says it is targeting certain dead stock to trim some of the fat.

"We went after the oldest inventory first," Funko chief operating officer Steve Nave said, according to Yahoo Finance. "Again, inventory that we felt like we could sell over time, but due to the operational constraints, it's just better to get out of it."

Funko's excess stock is housed in a rented warehouse in Arizona, and the company says that holding onto stock that isn't selling is "restricting our distribution centers throughout and incurring incremental container rental charges."

In that same call with investors, Funko reported that its company debt grew 42% from 2021, hitting a total of $245.8 million at the end of last year. At the same time, sales in its core collectibles category, i.e. the Funko Pop figurines, dropped 6.6%, with profit decreasing 108% to $5.2 million, too.

"It was clear on our last earnings call that the business and our operations hit an inflection point," CEO Brian Mariotti said, according to CNN. "A combination of macro factors and Funko-specific issues have disrupted our financial and operating performance to an unacceptable degree."

It's tough to pinpoint exactly what societal factors or consumer habits are contributing to the drop in demand for toys. A study titled "Toys & Games: United States" posited last year that sales of toys and games were expected to decline 15% in 2022 as a result of surging demand for at-home entertainment and stimulus payments in 2021, but a return to more normal life in 2022.

There was certainly a shift during the pandemic — when Funko posted $1 billion in net sales for 2021, up 58% over 2020 — and now, where Funko reported a loss of $47 million in the fourth quarter of 2022, down from a profit of $17 million during the same time in 2021.

Funko didn't indicate how it will dispose of the toys, only that it has hired a third-party company in Arizona to handle it.

From an environmental perspective, there's obviously the concern over these products ending up in landfills, or any of the other concerns associated with excess plastic. It's reminiscent of the program Burger King implemented in the U.K., where restaurants no longer gave plastic toys out with meals, and created spaces where customers could return old toys to be melted down and recycled.