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Thread: Christmas Blues for FAO Schwartz

  1. #1

    Default Christmas Blues for FAO Schwartz

    FAO Parent Accepts Bid for Flagship NYC
    1 hour, 24 minutes ago Add Business - AP to My Yahoo!

    KING OF PRUSSIA, Pa. - FAO Inc. will sell its flagship Manhattan toy store, FAO Schwarz, along with some other assets for $20 million, the bankrupt company announced Friday.

    The deal with VGACS Acquisition Inc., a subsidiary of D.E. Shaw Laminar Portfolios LLC, also includes a store in the Forum Shops in Las Vegas, FAO Schwarz's signature clock towers and its Internet and catalog businesses.

    The parent company hopes to gain bankruptcy court approval of the deal, or any better offer, by Jan. 22.

    FAO Inc., based in suburban Philadelphia, will sell the remaining inventory before the new company closes to remodel the two stores, with their reopening projected for next summer.

    The FAO Schwarz store in New York City draws tourists from around the world, with an image as a playland that has been reinforced by movies such as "Big," which featured Tom Hanks and Robert Loggia playing "Chopsticks" on a giant piano keyboard.

    The company also said it had completed the sale of 34 Right Start stores to Hancock Park Associates of Los Angeles. Terms of that transaction, which FAO had said on Wednesday was approved by a bankruptcy judge, were not disclosed.

    FAO Inc. filed for Chapter 11 bankruptcy protection on Dec. 4, less than eight months after emerging from an earlier bankruptcy. The company then had 15 FAO Schwarz stores, 38 Right Start stores and 89 Zany Brainy stores.

    The company said it does not expect common stockholders to recover any of their investments through the bankruptcy process.

    An FAO spokesman did not immediately return a telephone message Friday.

    FAO Inc.:

    Image of the GM Building; FAO Schwartz opened its flagship store at its base in 1985.

  2. #2

  3. #3


    December 27, 2003

    Deal Will Preserve Flagship Store of F.A.O. Schwarz Chain


    The flagship F. A. O. Schwarz toy store in Manhattan and a sister store in Las Vegas are being sold as part of a $20 million deal announced yesterday that will preserve the legendary name in childhood fantasy.

    FAO Inc., the parent company that has been dismantling its retail empire under bankruptcy protection, said the new owner, a unit of D. E. Shaw Laminar Portfolios, a New York investment firm, planned to remodel the two stores and reopen them next summer. Under the terms of the deal, the buyers are gaining the use of the F. A. O. Schwarz name and acquiring the F. A. O. Schwarz Internet and catalog businesses.

    The business founded by Frederick August Otto Schwarz traces its roots to Baltimore 142 years ago. He moved it to New York in 1880, and in 1931, in the midst of the Great Depression, he set up shop at the first of several Fifth Avenue sites.

    The flagship store on Fifth Avenue at 59th Street has been an emporium of dreams for children of all ages, bursting with collector's dolls, richly carved rocking horses and finely detailed model trains that chugged and whistled through little villages and mountain tunnels, all at suitably elegant prices.

    A decade ago, years after the Schwarz family sold the company, F. A. O. Schwarz embarked on an expansion through the malls of America that analysts say tarnished the company's elite reputation and thrust it into a losing battle with discount stores. The parent company, which operated 14 F. A. O. Schwarz stores and the Right Start and Zany Brainy chains, filed for bankruptcy protection early this year, regained its footing in April and then filed again this month.

    "They've rescued the iconic name and the two most high-profile stores," said Chris Byrne, the editor of Toy Report, an industry newsletter. "What remains to be seen is if they can reinvent F. A. O. Schwarz in such a way as to be profitable in the context of the current toy industry, which is competition based on price. In order to survive against the mass-market stores, I think they have to develop themselves into a unique destination with a unique product line and a unique consumer experience, just what F. A. O. Schwarz used to be."

    Neither the company nor the new owner would comment on the transaction or say what customers will find when the F. A. O. Schwarz stores in New York and Las Vegas reopen. They also did not say when the curtain would ring down on the current operations.

    An independent public relations executive involved in the deal, who agreed to discuss the transaction in vague terms only on the condition of anonymity, referred questions to Max Holmes, whom he identified as a principal in the D. E. Shaw firm. Mr. Holmes did not respond to phone messages. The public relations executive said that Jerry R. Welch, the chief executive of FAO, was not available for comment.

    FAO said in a statement that the deal required the approval of a bankruptcy judge. The public relations executive said the 12 other F. A. O. Schwarz stores and the 89 Zany Brainy stores would close. On Wednesday, a federal bankruptcy judge approved the sale of 34 Right Start stores to an affiliate of Hancock Park Associates, a private equity firm with offices in Los Angeles. No price was given.

    The company provided no details on what, if any, liabilities were being transferred along with the FAO units, and analysts said that made it virtually impossible to evaluate the $20 million price.

    "The number, $20 million, is not a big number," said Jim Silver, the publisher of two toy industry magazines, Toy Wishes and Toy Book. "But you don't know how much debt came with the stores. You don't know about inventory. I know they're buying a great brand name and I know they have an opportunity to be very profitable."

    Mr. Silver said the New York and Las Vegas stores were the most profitable ones and estimated that they accounted for about 80 percent of the revenue produced by the entire group of 14 stores.

    "The other stores were not profitable," he said. "They were not the type of store that somebody would frequent on a monthly basis. If you needed a birthday gift you might go to a place like Toys 'R' Us. Opening in the malls took away a lot of their panache. When you thought of F. A. O. Schwarz, you thought of this grand, unbelievable toy store. You walked into their stores in the malls and you never saw anything like that."

    Mr. Byrne, the newsletter editor, said the transaction was a good deal for the buyer.

    "Between the value of the F. A. O. name and the Internet and catalog businesses, I think they got real value," he said. "Those two stores are already tourist destinations, and they will become more so. A savvy person is going to figure out how to make them generate revenue consistently."

    Copyright 2003 The New York Times Company

  4. #4


    FAO Schwarz moved to NYC in 1870, and opened a store on Broadway. In 1880 he relocated to Union Square, where upscale stores such as Tiffany were located. After two more moves, the store settled into the newly built Squibb Building (745 5 Ave).

    In the mid sixties, the Savoy Plaza was razed (let's not get into that) and the GM building was erected. In 1986, FAO Schwarz moved into the GM building. Bergdorf Goodman, located on the southwest corner of 58 & 5th, expanded into the store vacated by FAO Schwarz.

  5. #5
    Forum Veteran krulltime's Avatar
    Join Date
    Sep 2003
    Manhattan - UWS


    FAO relaunch hits a snag
    Retooled toy store to open in fall


    Tots may have to wait late into the holiday shopping season to get a peek into the new FAO Schwartz.

    The fabled toy company - pushed into bankruptcy by price-slashing retailers - had said it would relaunch its New York store this summer, but will now have to wait until October or later to re-open its doors on Fifth Avenue.

    Because the thorough makeover of the store was slowed due to a dispute with the landlord, summer tourists have missed their chance to pick up the specialty toys the store is betting on for its comeback.

    Since FAO, with its high-priced location, can't compete on cost, it's returning for its comeback to its roots as a specialty toy store that offers unique items.

    Big-name toy manufacturers have not been contacted by FAO, analysts said, but rather small, independent vendors like the Groovy Girl toy and game line by IQ Kids, or expensive novelty pieces like Madame Alexander Dolls.

    FAO plans to market these one-of-a kind toys with events, like the Madame Alexander gala it used to host.

    The whole look of the store will be different, sources with knowledge of the makeover told the Daily News. The clock tower that once greeted shoppers with the signature FAO Schwartz song is gone, along with the former glass elevator.

    Instead, the lobby will feature a huge "interactive" space for children, the sources said. FAO declined to comment on the delayed opening or specifics of the new store's plan.

    Toy retailers have been crippled as discount chains such as Wal-Mart or Target started carrying toys, sometimes selling at a loss, in the key holiday shopping season. On Wednesday, Toys "R" us said it's looking to sell off its toy business.

    Industry sources said FAO plans to relaunch with the catalogue business and two stores. The Las Vegas store, in the Forum Caesars Palace, was slated to open in September, with the New York flagship to follow in late October.

    At least part of the problem is that a dispute with the landlord has delayed the renovations. In court documents FAO said a dispute with landlord Macklowe Properties pushed back the opening, though sources close to both sides say that has now been resolved.

    People familiar with the store say the Fifth Avenue location may not open till December. That means FAO would miss the beginning of the key holiday shopping season, which starts on Oct. 1 for the toy industry.

    FAO said "we will relaunch by holiday 2004," but declined to specify if it meant the stores or the online and catalogue business.

    Originally published on August 12, 2004

    All contents 2004 Daily News, L.P.

  6. #6


    :shock: I didn't even know that the FAO on 5th Avenue was closed---did that happen after the sale?

  7. #7
    Forum Veteran krulltime's Avatar
    Join Date
    Sep 2003
    Manhattan - UWS


    Fun & games at FAO store
    Holiday seen for relaunch

    FAO Schwarz's landmark toy store
    on Fifth Avenue is getting makeover
    that includes mini-amusement park
    and food court.


    The new FAO Schwarz will be much more than a world of toys.

    The fabled but bankrupt company hopes to relaunch by the holiday season with a mini-amusement park complete with video arcade, simulated games and food court at its Fifth Avenue store, people familiar with the plans told the Daily News.

    "It'll be even better than what they have at Toys 'R' Us," one source said, referring to the Times Square store's multi-level atrium and ferris wheel.

    Plans for the FAO space, currently being renovated, are a different business model for the upscale toy store, which was driven out of business by cost-cutting mass retailers.

    The new model, sources said, is an interactive space that will lend itself to events and experiences like those offered by Mattel's American Girl store on Fifth Avenue at 49th Street, which has been a blockbuster success. That store has a restaurant, theater and large displays of pricey dolls and accessories.

    As The News reported last week, FAO Schwarz's huge glass elevator and the clock in the lobby are gone. But the giant piano, whose keys Tom Hanks danced on in the movie "Big," should be back when the store returns. And the company is already auditioning people as toy soldiers for the front entrance.

    FAO Schwarz declined to comment on the new plan.

    For the makeover, FAO hired the Rockwell Group, best known for designing downtown power broker restaurant Nobu, the W Hotels, and Cirque du Soleil.

    FAO, which, now a subsidiary of multi-billion dollar hedge fund D.E. Shaw, needs to revamp its business to succeed this time around.

    An icon once renowned for stocking exclusive items, FAO lost its way as mass retailers like Wal-Mart and Target began selling the same items at deep discounts. The same problems have crippled Toys "R" Us, which said last week that it might sell off its toy business.

    This time around, FAO is talking to specialty toy manufacturers to stock unique items and banking on the interactive space, sources said.

    The dicey question is timing. The store was originally slated to reopen in June, then October, sources told The News last week. Now it could be as late as December. A dispute with the landlord has slowed down the renovations, sources said.

    No matter what it looks like inside, the fact that FAO remains shut, is disappointing visitors.

    Last week, Ben Sappio - stopped in his tracks on the corner of Fifth Avenue and 58th Street upon seeing the store still shut - said: "It stinks."

    "I really wanted to go there," said the 8-year-old from Orinda, Calif. "At Christmas last year we came too late, so my mom said 'next time.' But now it's closed."

    Originally published on August 16, 2004

    All contents 2004 Daily News, L.P.

  8. #8
    Forum Veteran
    Join Date
    Jan 2003
    Garden City, LI


    This is great. A NY landmark, virtually de-chainized (except for Vegas) and improved. I like the emergence of these conept type stores. Think Toys R Us is cool and hope it similar to FAO in being the only one left when they go down. Also read about the Disney of 5th ave being the only one left in America and being filled with play stuff like FAO and T-R-Us.

    It's good for the city to have things like this, especially when we're the only ones with it.

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