Retail

Funko not hindered by Toys R Us bankruptcy, CEO says 2019 will be an 'insane year' for the brand

Key Points
  • Funko doesn't allow any one retailer to make up more than 10 percent of its business. 
  • The company sells its products through a number of different retailers, some brick and mortar, some online and some that use both methods.
  • Often, Funko provides these retailers with exclusive collectibles that can only be purchased with that company, driving up demand and sales.
Sarah Whitten

If you love something, odds are Funko has turned it to a collectible — or has plans to.

The collectible maker, which went public in Nov 2017, is known for its stylized figurines of famous pop culture icons from "Star Wars" and "Avengers" to "The Golden Girls" and "Fortnite."

Funko has become a cornerstone in the geek merchandise industry, but it isn't your typical toy company. In fact, CEO Brian Mariotti balks at calling the brand one. Perhaps that is why it didn't face the same struggles that Mattel and Hasbro did after the fall of Toys R Us.

Or, it could be the fact that Funko says it doesn't allow any one retailer to make up more than 10 percent of its business.

The bankruptcy and subsequent closure of Toys R Us took a big toll on the toy industry. Sales slumped 2 percent last year, as toy makers found themselves with fewer shelves on which to place their inventory than in years prior. Toys R Us was estimated to account for 10 to 15 percent of all toy sales prior to its closure in June.

Yet Funko didn't escape Toys R Us' closure completely unscathed.

"We expected 6.5 to 7 percent growth in our total business in 2018 with Toys R Us, [then] we lost it," Mariotti told CNBC at New York's annual Toy Fair on Saturday. However, he reiterated the guidance of 25 to 26 percent net sales growth for full year 2018, set during Funko's third quarter conference call in November.

"We are never going to be reliant on one retail partner," Mariotti said.

While Mattel and Hasbro have warned investors that the lack of Toys R Us and other industry factors could result in a flat performance in 2019, Mariotti is confident about the coming year.

"I think 2019 is at an A+ level on content," he said. "I think we are going to have an insane year. I wouldn't be surprised if, when we give our guidance, it is not extremely optimistic."

Funko is set to report its fourth quarter earnings on Feb 28 and will provide full-year guidance at that time. In the previous quarter, the company reported net sales of $176.9 million, a 24 percent increase year-over-year.

Sarah Whitten

Funko sells its products through a number of different retailers, some brick and mortar, some online and some that use both methods. Often, Funko provides these retailers with exclusive collectibles that can only be purchased with that company, which helps to drive up demand and sales.

For example, Barnes & Noble is the only location that customers can purchase a Mr. Rogers Funko Pop that features the character holding a puppet. Similarly, Walmart is the only place fans can get a glittery version of Black Panther. Even drugstore Walgreens carries exclusive collectibles from Funko: It is the only place that consumers can grab a young Obi-Wan Kenobi Pop wearing a hood.

Funko also works with Hot Topic, GameStop, Target, Best Buy and national and local comic book shops.

Sarah Whitten

'We are not niche'

Mariotti pointed to a number of strong film releases as one reason that Funko is set for a stellar year. This year, the company will have figures tied to "Captain Marvel," "Avengers: Endgame," "Spider-Man: Far From Home," "Frozen 2," "It 2," "Star Wars: Episode IX," "Star Wars: The Mandalorian," "Aladdin," "Men in Black International," and more.

Funko is also releasing characters from beloved series and films like "The Addams Family," "The Office" "Cheers," "Caddy Shack," "Little Shop of Horrors" and "Ghostbusters."

Not to mention, the company also dabbles in music icons. Popular Korean boy band BTS is being immortalized in Pop form this year, as is Migos, Johnny Cash, NSYNC, The Backstreet Boys, Post Malone and Kiss.

Also, there are the famous athletes from the Major Leagues. Funko has a lineup of baseball, soccer, hockey, basketball, wrestling and football stars as well as a collection of sports mascots.

"We believe if you take video games, sports, music, TV and theatrical, those five categories represent 85 to 90 percent of the population consuming them," Mariotti said. "We are not niche, we are not boutique, we are mainstream. Pop culture is mainstream."

Mariotti said that his big push going forward is to better explain Funko's vision to Wall Street. Shares of the company are up more than 154 percent over the last 12 months, and 38 percent since January.

"We are absolutely, positively convinced that we are going to be a $2 billion a year company sometime in the future and we think we have a path to get there," Marrioti said — arguing that Funko doesn't see other major toy brands as rivals.

"We think we are in our own lane, doing our own thing and those guys would kill to have men and women boys and girls buying their products," he added.

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Key Points
  • At a time when cereal sales are on the decline, Funko is offering up a sugary indulgence — and it's selling out fast.
  • Funko's boxes is tapping the same affection a sports fan would have seeing their favorite player or team on a box of Wheaties.
  • While Funko's cereal accounts for a very small part of the company's overall revenue, CEO Brian Mariotti said the new launch fits into Funko's strategy of creating short-term demand for sought-after collectors items.