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Shopping Centers Today -> January 2004
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UNMERRY XMAS FOR SOME TOY STORES
BY IAN RITTER
The holiday season is usually a cheerful time for toy retailers, but that wasn’t the case for some of them this past year.
Things got off to a bad start in November, when Toys ‘R’ Us said it was closing its Kids ‘R’ Us and Imaginarium chains by Jan. 14. Then, last month, FAO Inc. filed for Chapter 11 bankruptcy protection, spurring the company to liquidate its Zany Brainy chain and put its FAO Schwarz and Right Start stores on the market (the company had yet to make a deal at SCT’s press time).
FAO and Toys ‘R’ Us have been hurt by competition from Wal-Mart and other discount chains that can sell the same products cheaper, analysts note.
Whatever the pain felt by the retailers themselves, though, the closings will have little effect on shopping center landlords, say analysts, because no one company has a particularly high exposure to any of the chains.
FAO first filed for Chapter 11 last January. It re-emerged 100 days later, having closed 113 stores across the three chains. Then the company tried a number of improvement strategies, including a deal in February to put boutique versions of its units inside select Saks department stores. FAO had not said what it plans to do with those small shops. But now it is liquidating all 89 Zany Brainys. FAO also has 38 Right Starts and 15 FAO Schwarz units it is trying to sell.
Meanwhile, Toys ‘R’ Us is closing 146 Kids ‘R’ Us apparel stores and 36 Imaginarium units. (Imaginarium sells educational toys and games.) Kids ‘R’ Us third-quarter sales had dropped 11.4 percent. Sales figures for Imaginarium were not available.
“Our efforts to reverse significant performance declines within the freestanding Kids ‘R’ Us and Imaginarium stores have not met with success,” said Toys ‘R’ Us Chairman and CEO John Eyler in a news release at the time.
The closure of these stores doesn’t mean the toy retailer is exiting the children’s apparel business altogether, though. The company says it will continue to sell clothing and Imaginarium goods through both Toys ‘R’ Us and Babies ‘R’ Us, as well as through the Toysrus.com Web site.
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