Why the Funtastic (ASX:FUN) share price opened 10% higher today

Funtastic Limited (ASX: FUN) shares opened nearly 10% higher this morning after the company updated investors on its future growth prospects. In early trade, the Funtastic share price jumped to 11.5 cents before retreating to 10.5 cents, flat for the day so far.

By comparison, the S&P/ASX All Ordinaries Index is currently trading 0.17% lower.  

Let’s take a look at what the toy and lifestyle products producer reported today.

What caused the Funtastic share price to jump?

The Funtastic share price responded positively this morning after the company announced it would be relaunching its Babies R Us brand and expanding its warehouse capacity.

The Australian Babies R Us e-commerce website, along with that of Toys R Us, was purchased by Funtastic in October last year for $29 million. The company relaunched the Toys R Us website soon after. Funtastic expects the Babies R Us website relaunch to begin during the first half of 2021 and further expanded during the second half of the year. Funtastic claims the baby retail market is an “under-represented retail category.”

In further news boosting the Funtastic share price this morning, the company advised that, in relation to the Toys R Us website, organic and direct visitor sessions grew by 200% in January and February compared to the first two months of 2020.

To support the forecast growth, Funtastic is investing in its warehouse capacity. In its statement, the company stated it has secured access to 5,500 square metres of warehouse space in suburban Melbourne. The manufacturer, distributor and e-tailer will commence using the facility from April 2021 and commence processing orders from there by the end of June.

Funtastic managing director and CEO Louis Mittoni said of today’s report:

The relaunch of Babies R Us is a significant milestone and important phase in the development of the Group. Advancements in Toys R Us’ performance and the expansion in our logistics capabilities are also vital accelerators for our innovative e-comm platforms, for which we are well funded to implement in coming months.

Business streamlining

Also included in today’s market announcement was news Funtastic would be “streamlining” its business going forward. Having already sold its confectionery business, Funtastic announced its 18-year wholesale distribution contract with Razor USA would be coming to an end.

Razor is a “scooter and ride-on” vendor for children. 15% of Funtastic’s revenue in the first half of FY21 resulted from Razor products. Funtastic further advised it is continuing discussions with Razor regarding the continued supply of the brand for Funtastic’s retail channels. 

Additionally, Funtastic reported that its overseas storage and services will be ended in favour of fully onshore operations.

Funtastic share price snapshot

Almost 52 weeks ago, the Funtastic share price was trading at less than 1 cent. Since then, its value has increased by a gigantic 1400%. However, Funtastic shares have fallen by around 46% from their one-year high of 19.5 cents.

Funtastic has a market capitalisation of $88.8 million.

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Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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