KB Toys to close 156 U.S. stores (Company I work for)

Necro

VIP Room Moderator

By Ylan Q. Mui

Washington Post
Article Launched: 11/03/2007 03:00:23 AM PDT

WASHINGTON -- KB Toys has targeted 156 stores across the country for closure, according to internal company documents, underscoring the cutthroat competition facing toy retailers this holiday season.

The company, which has fewer than 600 stores, plans to hand over management of the selected shops to liquidators Gordon Brothers on Thursday and shut them for good in January, according to a memo from a KB executive to employees. In another memo dated Monday, KB said it planned to close stores at Fair Oaks Mall, Manassas Mall and Dulles Town Center in Virginia and Bowie Town Center, Montgomery Mall and Silver Spring's City Place Mall in Maryland.

The documents were provided by a store manager, who requested anonymity because the company has not publicly released the information. Geoffrey Webb, KB Toys director of advertising and sales promotion who also handles media inquiries, declined to comment on the documents or potential store closings. KB Toys Chief Executive Andrew Bailen had said in news reports in August that the company planned to close a significant number of stores this fall.

"Making the decision to close your store was very difficult for KB Toys," Gerry Murray, KB Toys senior vice president of human resources, wrote in a letter to employees. "We recognize the effect this will have on you, your associates and your customers."

The store closures are the latest setback for the embattled company, which replaced its chief executive this summer and has had

a lot of turnover in top management.

"I just think that KB Toys is in a death spiral," said C. Britt Beemer, chairman of America's Research Group, a consumer behavior research firm.

KB Toys filed for bankruptcy in 2004 after a bruising holiday price war with Wal-Mart caused KB Toys' sales to plummet. Then, the chain, based in Pittsfield, Mass., operated 1,231 stores. Now it has less than 600. Private equity firm PKBT Funding, an affiliate of Prentice Capital Management, became majority owner in 2005 when the chain emerged from bankruptcy and has been attempting to turn it around since.

KB Toys is not the only retailer facing a tough holiday season. Several industry experts said the next two months will be difficult for all toy stores, which have been battered by this summer's massive recalls of defective and lead-tainted merchandise.

According to a survey Deloitte & Touche released this week, 82 percent of shoppers said safety concerns will influence their buying decisions. The report said consumers will try to stretch their dollars farther. The average amount they plan to spend on gifts this year is slightly less than in 2006 -- $569 compared with $584. But they will be using the money to buy more presents, according to the survey.

Exacerbating the dour outlook for consumer spending is the lack of growth in the toy industry. Gone are the days when a cuddly teddy bear tied with a bow satisfied children. Now kids and adults alike are clamoring for laptops, iPods and high definition TVs. Annual sales of toys have stagnated at about $22 billion in the past three fiscal years, while consumer electronics have skyrocketed 19 percent from $102 billion in 2004 to $121 billion in 2006, according to the consumer research firm NPD Group.

That means retailers must fight to increase sales by stealing market share from each other. Wal-Mart came out swinging early, announcing Oct. 1 that it was cutting prices on some of the season's hottest toys by 10 percent to 50 percent. The NASCAR Ride-On went from $199.97 to $177.72. On Friday, Wal-Mart cut the price to $144.72, part of blockbuster discounts on a handful of items that are normally reserved for the day after Thanksgiving.

"Did they make the announcement to tell the consumers, or did they make the announcement to tell the competitors?" Beemer said. He said Wal-Mart's message was, "Look guys, if you take any of our customers away, you're going to be in for a battle."

Wal-Mart's aggressive posturing intensified the pressure on KB Toys. The retailing giant dominates almost every category it enters, elbowing competitors out of the way by undercutting them on price. Wal-Mart is the top seller of toys in the country with about 26 percent of the market, according to Howard Davidowitz, chairman of Davidowitz & Associates, a national retail consultant and investment banking firm. KB Toys' market share is negligible, he said.

"When Wal-Mart gets into something and starts focusing on price and it's a commodity, watch out," Davidowitz said.

Wal-Mart has also felled other toy retailers. A consortium of private equity groups bought Toys R Us for $6.6 billion in 2005 after it struggled unsuccessfully to compete against the behemoth. FAO Schwartz filed for bankruptcy in 2003 and was purchased by investment firm D.E. Shaw.

KB Toys' operating model made it particularly vulnerable. Its stores are located mostly in malls, which charge high rents and have declined in popularity in recent years as outdoor pedestrian shopping areas took off. The company's assortment of merchandise is also constrained by the small size of its stores compared with the big boxes of Toys R Us.

Still, Davidowitz said, no toy retailer is safe this Christmas.

"The bottom line is the consumer has never been weaker," he said. "We're going to have a terrible holiday."
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Fuckin sweet man. This company never has had their act together, not suprising.

So they are closing the store I work in which will be awesome (Not really).

Anyway, thats the deal!

Suntan Superman

WC's Resident Samoan

Wal-Mart continues to destroy the economy

People continue to foolishly shop their unknowingly

Why couldn't I be one of the dumb ones?

Necro

VIP Room Moderator

lol working for KB I do have to say they are boneheads. They make the most insane decisions ever...

Gigglypuff

Hmmm, so now what Nec?

Necro

VIP Room Moderator

I guess I will have to run for President

Jayman

Super Moderator

Nec, I worked at K-mart back in 2002 when they were closing a bunch of them. It took a few months for the store to close completely. Just be prepared for monster clearance sales and people trying to negotiate prices for every piece of merchandise.

I'm pretty sure you can't barter in retail stores, but some people thought they would try. People are dumb.

Necro

VIP Room Moderator

lol yeah I actually get some people like that now. Thinking they can just name a price for stuff. This isn't too far away from what I deal with every year. We always assume we are going to a close, difference is we finally are now.

I'll probably be working at another kb anyway after this ones closes. It's slated to close in January sometime.

Beaker

That means redstone loses another business. The landlord must be going broke

U MAD

Necro

VIP Room Moderator

lol that guy dont care. He's a hardass. He's had ames closed, cherry, and webb, ground round. Shit man this guy dont even want money.

He charges an arm and a leg for rent..

Blitzkrieg

Administrator

lol.. you're right. All those stores have been boarding up like project housing in recent times around this area. My advice.. don't apply for K-Mart. They'll all be gone soon enough..