Not so Funtastic news for toy distributor

The future of toy distributor Funtastic is not looking so fantastic, with the company downgrading its full-year earnings outlook and announcing the abrupt departure of its chief executive.

The toy group, whose shareholders include Lachlan Murdoch and Harvey Norman executive chairman Gerry Harvey, announced its weaker-than-forecast sales yesterday, along with the resignation of chief executive Stewart Downs.

The company owns local rights to a range of toy brands such as Pillow Pets, Ben 10 and Power Rangers, and has consistently reported an average of one earnings warning a year since 2010, reports Fairfax Media.

In its announcement yesterday, the company said its earnings before interest, tax, depreciation and amortisation for the 12 months ending in July are expected to slump to between $10 million and $12 million, down from a previous guidance of $19 million to $23 million.

Funtastic had expected the North American distribution of its slushy maker toy, Chill Factor, to give the company a boost, but said sales had been slower than expected, “due in part to cooler than average weather and a slower than anticipated full distribution capability in these geographies”.

Grant Mackenzie, Funtastic’s new chief executive officer in the wake of Down’s resignation, told SmartCompany yesterday’s announcement reflected the company attempt to get its credibility back.

“We’ve had challenges,” says Mackenzie. “But we don’t want to carry that baggage into the new financial year.”

He said the company’s core strategy had not changed and it was still looking to control its own brands and continue its geographical expansion.

“But the challenge is, that can’t happen overnight,” he says. “We’re taking a breath and assessing.”

Mackenzie says Funtastic will be looking at creating a more cost effective operation and streamlining its global and domestic operations.

“We’re looking at a smarter way to do business,” says Mackenzie.

In 2012, off the back of Funtastic’s first dividend in five years, Downs told Private Media the company was going back to basics to achieve profitability: “[We are] doing what we are good at. We are not scared to make the tough decisions so that all of our sales are about profitability.”

Downs’ simplification strategy, which saw the company’s toy brands slashed from 66 to 22 and their staff numbers cut by over 50% in 2012, doesn’t seemed to have worked for the company on a longer term basis.

Downs will be replacement with fellow board member Nir Pizmony.

Pizmony sold his own toy company, JNH Australia, to Funtastic in 2002 for $30 million, giving company licences to well-known toy brands like Bob the Builder, Thomas and Friends, Digimon and The Wiggles.