Funko Scrambling to Deal with Tariff Troubles: Downsizing, Shifting Sources, and a Hunt for Capital

The usually vibrant world of Funko, known for its collectible Pop! figures and pop culture merchandise, is facing a stark reality. The company’s latest quarterly report reveals a series of significant moves aimed at navigating the choppy waters of tariffs, including downsizing its operations, shifting its manufacturing sources, and actively seeking new capital.

The situation appears serious, underscored by the inclusion of a “going concern” statement in their recent 10-Q filing. This statement directly relates to Funko’s forecast of potentially falling out of compliance with its loan covenants. As the company itself stated, this “raises substantial doubt about the Company’s ability to continue as a going concern for the next twelve months.”

To address this precarious financial position, Funko is actively engaged in several critical strategies. They are currently in negotiations with their lenders to modify existing loan agreements, hoping to avert a potential default. Simultaneously, the company is exploring alternative avenues for debt financing and is openly considering “other potential business opportunities or strategic transactions” – a phrase that often signals the possibility of selling all or part of the company.

Recent crisis management efforts have already been implemented. Notably, Funko temporarily paused all outbound shipments from China. While this disruption caused concern, the company is reportedly preparing to resume these shipments to select retailers soon. Furthermore, Funko is accelerating its existing plans to move manufacturing away from China to other Asian countries. CEO Cynthia Williams stated in a recent conference call that they expect China to account for only about 5% of U.S. shipments by the end of the year, a dramatic decrease from the previous level of approximately one-third.

On the consumer front, Funko had already warned of potential price increases earlier in the week. It has now been revealed that the primary change involves raising the price of their flagship POP! figures from $12 to $14.99. According to Williams, this price adjustment has been under discussion with retail partners since January, and the company is not currently planning any further price hikes beyond these previously communicated changes.

Internally, Funko has undertaken significant cost-cutting measures. This includes a substantial 20% reduction in its workforce, implemented in two phases during March and this month. Additionally, the company is further streamlining its product offerings through SKU rationalization, aiming to eliminate lower-margin and slower-selling items.

The financial results for the first quarter paint a challenging picture. Funko reported a net loss of $27.6 million, a worsening from the $22.7 million loss experienced in the same period last year. Net sales also declined from $215.7 million in Q1 2024 to $190.7 million in Q1 2025. This sales downturn was primarily concentrated in the U.S. market, where sales plummeted by 16.7%. This follows a full year 2024 where the company already recorded a loss of $14.7 million.

It’s clear that Funko is facing a significant hurdle in navigating the complexities of international trade and its impact on their cost structure. The coming months will be critical as the company works to secure its financial footing, adapt its supply chain, and manage the impact of price increases on consumer demand. The future of this pop culture giant hinges on the success of these strategic moves in a challenging economic landscape.