Washington-based collectibles giant Funko announced during its Q2 earnings call yesterday the need to rejig its product lines and implement substantial cost-saving measures following a third consecutive quarter of losses. 

Funko reported Q2 net sales of US$240 million, which is down by 24% from the same period last year (US$315.7 million). This slide was driven by ongoing inventory and ordering issues at US retailers, which interim CEO Michael Lunsford expects to continue into the second half of the year. As a result, the company has lowered its net sales expectations for the full year from US$1.26 billion to US$1.12 billion. 

Funko’s core collectibles business was hit hard this quarter, with the segment’s net sales dropping by 25.5% to US$173 million. Its apparel and backpack brand Loungefly posted similar results, with a sharp decline of 28.5% in net sales to US$50 million. The company’s only division to show growth was its “other brands” segment, which includes Austin-based poster-maker Mondo and internal board game developer Funko Games. Other brands generated net sales of US$16.3 million, up by 28.8% from US$12.7 million in Q2 2022. 

While these sales drops are in line with the toyco’s expectations, Funko has plans to trim the fat from its product lines to get back in the black.

“We have also begun reshaping the company to focus our energies and resources on Funko’s core products,” said Lunsford in the report. “Putting our fans and brand first, running the business like a lean startup, and investing in areas where we can grow profitably will guide and inform every decision we make.”

Earlier in the year, the Pop! manufacturer began implementing cost-reduction plans to generate US$155 million to US$185 million in cost savings. According to Funko’s CFO and COO Steve Nave, the company is ahead of schedule on this strategy, thanks to the rapid disposal of excess inventory. This has allowed Funko to process customer orders more quickly and eliminate hefty storage and container costs. 

Nave also referenced Funko’s recent round of layoffs in the report, noting: “These actions are estimated to generate approximately US$38 million of incremental annualized savings, of which approximately US$20 million is related to the workforce reduction.”

During the company’s lengthy restructure, Funko’s board of directors and interim CEO will also be hard at work hunting down a new permanent CEO to fill the shoes of Brian Mariotti, who took an immediate leave of absence and stepped out of the post in July.