Funko is expanding distribution, landing an order at Foot Locker and bolstered its presence at Walmart, CEO Brian Mariotti said as the company released Q3 earnings.

The company’s Pop! vinyl figures are part of a new collectibles display at Foot Locker that is being expanded to 60 locations and represents the chain’s first venture into toys, Mariotti said. Foot Locker launched the displays earlier this fall at several high-profile locations; it’s carrying Funko product with a heavy emphasis on sports licenses, Mariotti said.

At Walmart, Funko’s figures have largely moved from the toy department to a new collectibles display in the entertainment section, an action that resulted in a transitional 40% drop in its Walmart business as merchandise shifted to its new home, Mariotti said. Walmart has typically accounted for 5-6% of the company’s annual revenue, and sales are expected to increase “sharply” in Q4 and beyond, Mariotti said. The new collectibles displays at Walmart range 4-20 feet, he said. Overall, mass merchants accounted for 10% of Funko’s revenue in 2017.

Funko also gained distribution at The Entertainer in the UK where content produced by its animation arm is shown on TVs alongside relevant vinyl figures. It also entered Denmark’s Top-Toy, which has installed an “Awesome Stuff” section for collectibles in 220 stores across Denmark, Finland, Germany and Sweden. Overall, Funko added 1,600 stores in EMEA for its products in Q3, Mariotti said.

Net income for the quarter end September 30 declined 2.4% to $8 million despite a 23.9% revenue increase to $176.9 million; it includes $1 million in severance expenses tied to the departure of Loungefly founder Trevor Schultz and “certain other members” of senior management, the company said. Funko acquired Loungefly last year. It also includes $2.7 million in transaction costs, the bulk of which was tied to a one-time “consent fee” paid for “certain” licenses, CFO Russell Nickel said without providing further details.

Funko’s number of “active” properties grew 38% from a year to 553, including the addition of Fortnite, but average sales per unit declined 10% to $320,000 as revenue was spread over a larger number of figures. Funko’s figure sales jumped 23.5% to $141.7 million with those of Pop! Vinyl products rising 26%. In handbags, backpacks and other products, revenue rose 25.6% to $35.1 million. U.S. sales increased 16.4% to $121.3 million, while those in international markets jumped 44.1% to $55.5 million.

Contact:

Funko, Russell Nickel, CFO, 425- 783-3616, rnickel@funko.com