PHILADELPHIA FAO Schwarz toy stores file for bankruptcy protection

FAO Schwarz suffers as other stores offer the same toys for less.
PHILADELPHIA (AP) -- Unable to pump up holiday sales or find a buyer, the owner of FAO Schwarz toy stores filed for Chapter 11 bankruptcy protection Thursday, less than eight months after emerging from an earlier bankruptcy.
The announcement came three weeks before Christmas, and unless a buyer emerges soon, the chain, including the landmark store on New York's Fifth Avenue where shoppers are greeted by a giant teddy bear playing with blocks, may be hosting its last holiday rush.
It's possible new investors can revive FAO Schwarz in some new form, possibly trading on its cachet as a toy boutique for the rich, but analysts said the toy stores begun by Frederick August Otto Schwarz in 1862 may simply cease to exist.
"It wouldn't be the first time an iconic brand hasn't been able to survive changes in the marketplace," said Sean P. McGowan, a toy analyst at Harris Nesbitt Gerard.
FAO said it was starting inventory clearance sales at its 142 FAO Schwarz, Zany Brainy and The Right Start stores nationally.
Sale efforts continue
Efforts announced last month to sell the 15 FAO Schwarz stores and The Right Start chain of 38 stores will continue through Dec. 15, the company said.
FAO said those businesses will be liquidated if they can't be sold, and the Zany Brainy business already was being liquidated.
"FAO has been that last bastion of toy store fantasy that people hold onto," said Chris Byrne, an independent toy consultant and editor of Toy Report.
But Byrne said while FAO Schwarz once had its own niche, tempting Americans with the finest imported toys from Europe, other stores now carry many of the same games and gizmos, and discount stores often sell them for much less.
"People have a warm feeling about FAO Schwarz, but not so warm that they are going to pay 20 percent more for toys," Byrne said.
The Fifth Avenue store is a tourist attraction, having been used as a location in movies including "Big," starring Tom Hanks, and "Home Alone 2," starring Macaulay Culkin.
But it's being pressed by Toys "R" Us. Holiday-shopping parents and kids are flocking to a huge Toys "R" Us store on Times Square with enticements including a 60-foot-high Ferris wheel and 34-foot-long, 5-ton animated dinosaur. "There aren't too many stores that have Ferris wheels," McGowan said.