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Earnings Results: Funko stock cut in half as earnings shrink and holiday forecast calls for no growth

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A figure previously provided for Funko’s relocation costs was inaccurate. This story has been updated.

Funko Inc. shares are on track to lose half their value Friday, after the company known for its Pop line of collectible figurines detailed a surprising earnings decline and slashed its annual forecast ahead of the holiday season.

Funko
FNKO,
-50.13%

reported that third-quarter profit declined to $9.63 million, or 19 cents a share, from 28 cents a share a year ago. After adjusting for stock compensation and more — including more than $1 million in costs related to relocating employees and inventory to a new facility in Arizona — Funko reported earnings of 28 cents a share, down from 39 cents a share on an adjusted basis a year ago.

Revenue rose more than expected, to $365.6 million from $267.7 million. Analysts on average expected adjusted earnings of 50 cents a share on sales of $319.6 million, according to FactSet.

Funko’s sales beat in the third quarter made executives’ decision to decrease their annual sales forecast ahead of the holiday season even more worrisome. Funko management had guided for 2022 net sales of $1.3 to $1.35 billion, but brought that down to a range of $1.29 billion to $1.33 billion Thursday.

With $989.67 million already in the books for the year, the reduced annual guidance suggests Funko will bring in $300 million to $340 million, roughly even at the top of the range with last year’s fourth quarter, which produced $336 million in net sales. Funko’s sales grew 36.6% year-over-year in the third quarter, and 42.8% overall through the first nine months of the year.

Funko shares were off 50.3% in Friday morning trading.

Funko executives reduced their profit forecast for the year even more as they spend to build out their infrastructure. They now expect full-year adjusted earnings of 85 cents to 95 cents a year after previously stating more than double that amount, $1.88 to $1.99 a share.

Funko has already reported adjusted earnings of 88 cents a share this year, suggesting that the company could report a loss or a slight adjusted profit in the holiday quarter. Analysts on average were projecting fourth-quarter adjusted earnings of 81 cents a share, according to FactSet.

“As we continue to support our rapid growth, we are making needed short-term investments to upgrade our infrastructure to help provide the capability and capacity to support our future growth,” Chief Executive Andrew Perlmutter explained in a statement.

The stock has declined 49% this year, after hitting $1 billion in sales last year thanks to a huge holiday season and attracting celebrity investors earlier this year. The S&P 500 index
SPX,
+1.28%

has declined 21% so far in 2022.

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