View Full Version : Possible KBtoys problems

Val Da Car
12-23-2003, 01:19 AM
I would consider getting that Shuttle for $59 now before it is gone forever (maybe)


KB Toys Delays Payments to Some Suppliers

By Emily Kaiser

CHICAGO (Reuters) - KB Toys has halted payments to certain suppliers through Christmas in an effort to conserve cash, financial sources and suppliers familiar with the situation told Reuters on Friday.

There is a moratorium on vendor payments through Dec. 25," said one person with knowledge of the financial situation, who spoke on condition of anonymity.

Another financial source said the moratorium was put in place last week, but a handful of key suppliers were still being paid.

"I don't think it's any secret that it's a very challenging retail year, but what we're doing financially is a private matter," said KB spokesman John Reilly, declining to comment on the issue.

The holiday season is typically the key money-making period for toy retailers but stores faced particularly savage price competition this year as discounters such as Wal-Mart Stores Inc. (NYSE:WMT - news) and Target Corp. (NYSE:TGT - news) slashed prices even further to draw customers.

Larger toy stores such as Toys R Us Inc. (NYSE:TOY - news) have also put pressure on the smaller players, who can't match the buying power or selection at a megastore.

FAO Inc. (Other OTC:FAOOQ - news), parent of the iconic FAO Schwarz toy-store chain, earlier this month filed for Chapter 11 bankruptcy protection for the second time this year.

There were signs of possible problems at KB earlier this week, when industry sources said the retailer planned to stop selling video games in hundreds of stores nationwide.

A senior source at a leading video game publisher, who also confirmed that KB was not paying some vendors, said the retailer was already a dwindling revenue source for the games business, so any unmade payments would likely be small.

KB, which has approximately 1,300 stores, is owned by private equity firm Bain Capital, which could not be reached for immediate comment.

The retailer runs a variety of store formats, with a strong presence in shopping malls, and sells toys online through the Web sites KBtoys.com and eToys.com.

Sears, Roebuck and Co. (NYSE:S - news) in October announced that it would sell KB's toys in 600 of its 870 department stores, expanding a two-year-old agreement.

"KB Toys at Sears ... are well-stocked and selling heavily," Sears spokesman Ted McDougal said. He declined to comment on the payments question, referring any questions on the matter to KB.

The payments move was first reported in the New York Post on Friday.

One of the financial sources said KB was considering its options, and one possibility was getting out of the name-brand toy business altogether, and focusing instead on its store-brand offerings which carry higher profit margins.