KB Toys seeks bankruptcy protection
Wednesday, January 14th 2004, 12:00 am
By: News On 6
PITTSFIELD, Massachusetts (AP) _ Blaming the fierce holiday price wars in toys, KB Toys Inc. announced Wednesday that it filed for bankruptcy protection from its creditors.
The privately held retailer with 1,300 stores was hit hard by discounters, primarily Wal-Mart Stores Inc., during the holiday buying season. Last month, it informed suppliers that it was slowing down payments amid sluggish sales.
The filing under Chapter 11 of the federal bankruptcy laws will enable it to develop a financial reorganizaton plan while continuing its business operations.
It said it hopes to emerge from bankruptcy protection before the 2004 holiday season.
KB Toys, which accounts for about 4 percent to 5 percent of the U.S. toy business, was the second casualty in the toy market this season. In early December, FAO Inc., owner of the famed FAO Schwarz toy stores, filed for Chapter 11 for the second time.
Toys ``R'' Us Inc., the nation's second-largest toy chain behind Wal-Mart, also suffered this past holiday season. Earlier this month, it said its overall sales rose less than 1 percent for the critical holiday sales period, and that sales at U.S. stores open more than a year fell almost 5 percent. The company said profits would be less than expected for the year.
The 80-year-old KB Toys, based in Pittsfield, announced it secured US$350 million in financing from the Fleet Retail Group.
Officials blamed the increasing use of toys as loss leaders by merchants during the early part of the holiday season and increased price competition in the toy market for a sharp decline in its sales and earnings during the fourth quarter. Wal-Mart took the industry by surprise when it slashed prices on hot toys in October, several weeks earlier than in the past.