Toy distributor Funtastic’s return to profitability was helped by fluffy toys that doubled as pillows, and this year it hopes that female superhero dolls will prove just as popular.
Funtastic on Thursday unveiled a net profit of $10.4 million for the year to July 31, up from a loss of $38.2 million in 2010/11.
Mr Downes attributed the turnaround to a 19 per cent reduction in costs and improved profit margins on a narrower and more successful product range.
Among those specialised products driving profit growth the highly popular Pillow Pets, as well as the acquisition of licences to make and distribute some LEGO products.
“We purchased the rights of Pillow Pets outside the US and Canada,” he said.
“It had been in the US for eight years prior to us tacking the rest of the world on and they had sold in excess of 50 million units so we had some built up success.”
Mr Downes said the current low consumer sentiment meant it was important to provide value for customers and know what they were looking for.
“In a tougher retail environment you’ve got to understand what your customers want,” he said.
He said while trading conditions would remain tough for the foreseeable future, Funtastic’s fortune was not reliant on retail.
Funtastic distributes toys, sporting goods, confectionery and nursery products in Australia, including the Ben 10, Razor and Power Rangers brands.
It also owns a toy manufacturing business in Hong Kong and the MadMan home entertainment company.
The company was able to reduce costs by streamlining the business and slashing logistics marketing costs.
Mr Downes said Funtastic had also more than halved its workforce since 2009 through redundancies.
Funtastic expects to lift earnings before interest, tax, depreciation and amortisation to between $23 million and $25 million in 2012/13 from $20.2 million in 2011/12.
It is pinning its hopes on a successful launch of six new products, including two new lines of dolls, to help drive that earnings growth.
Winx Dolls who are based on an Italian action and fantasy cartoon and La Dee Da Dolls who are four teenaged friends who created a fashion label.
Other new products for Funtastic this year include Roxx collectable games aimed at boys and a goo-like product that dissolves in water.
Meanwhile Funtastic expects it will be able to start paying dividends in 2012/13 after reducing its debt by $20 million.