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Funko CEO: We are in 'phenomenal position' to handle higher US tariffs on China

Brian Sozzi

Funko (FNKO) is prepared to handle potentially higher tariffs on China from team Trump come September 1.

“We are light years ahead of our competition, 70% of our goods are produced outside of China — that remaining 30% is distributed around the world,” Funko CEO Brian Mariotti said on Yahoo Finance’s The First Trade. “If the tariffs were enacted in September a very small cost increase could offset all of that — and we don’t even think our retail partners would end up raising the MSRP. We are in a phenomenal position and that’s just thoughtful planning and smart execution.”

Mariotti thinks Funko’s ability to tap into pop culture trends, notably with figurines tied to popular movies and streaming content, has it well positioned even smack in the middle of a trade war with a key manufacturing country like China.

“I think we are the anti-toy company,” Mariotti added. “We are disruptive and carving our own path.”

Toymakers continue to be on edge ahead of this year’s holiday season amid tariff worries. The toy industry for years has relied on China to cheaply produce products that could then be shipped at healthy margins globally. But now, the likes of Hasbro (HAS) and Mattel (MAT) are being forced to uproot their supply chains (at their expense) in China and also consider price increases for the holidays that could hurt consumer demand.

Q2 earnings results trounce expectations

Plush dolls, based on Marvel Comic's characters and manufactured by Funko, are displayed at the American International Toy Fair. (AP Photo/Mark Lennihan)

At least for Funko, its financials continue to support Mariotti’s claims it could still thrive in a trade war ridden world.

The toymaker said Thursday evening that second quarter sales clocked in at $191.2 million, trouncing Wall Street analyst forecasts for $171 million. Earnings of 25 cents a share surpassed estimates of 13 cents a share.

Funko credited strong consumer demand for “Avengers: Endgame,” “Stranger Things” and Pokemon toys for the upside. And despite the threat of more tariffs from the Trump administration, Funko lifted its full-year profit outlook.

The company now sees full-year earnings of $1.15 to $1.22 a share from $1.05 to $1.15 a share previously.

Shares rose 2% in early Friday trading.

Brian Sozzi is an editor-at-large and co-host of The First Trade at Yahoo Finance. Follow him on Twitter @BrianSozzi

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