KB Toy Store Files for Bankruptcy Among Sluggish Sales, Rising Debt

KB Toys Inc. has filed for bankruptcy in the United States, seeking protection due to rising debts and lack of sales that could have pulled it out of the red. The news is not good for employees of the company, nor fans of the store, because underwritten in the bankruptcy request is the fact that KB Toys will be closing its stores due to the drop in sales. According to Bloomberg, KB Toys noted that they owe nearly $27.2 million to Li & Fung (A toy supplier) and that they are unable to pay off their debt to that company. This is a huge chunk of change, and just one of the issues facing KB Toys.

The biggest problem that KB Toys was facing though, was the lack of sales as both forecasts and current sales had failed to reach what was hoped. This has put the 86-year old company at large risk for closing its doors, and will result in probably exactly that. The plan to close all of its stores due to the lack of sales comes just three years after KB Toys had already closed half of their stores. Three years ago it looked like KB Toys was at risk, and it is actually a little surprising that the toy distributor Li & Fung was willing to do so much business with a company that looked like it might go under.

One of the things that have led to a downfall in sales for KB Toy stores has to be the influx that many other stores have seen in recent months and years. With store like Walmart and Target offering up the same product at a marked down discount, it's hard to blame consumers for turning to other stores to do their shopping. Another item that KB Toys has prided itself on selling a lot of are video games, but with so many other stores offering up video games and their consoles at better prices (like Best Buy and Costco) it seems consumers have not really wanted to brave the mall crowds as frequently to make purchases at KB Toys.

From the looks of it, KB Toys will probably stay open through the holidays to try and recoup some of the money they owe by selling current inventory, but in the long run, this appears to be the end of the toy store chain. For those who have relied upon KB Toy stores over the years, it is certainly time to move to a new chain with which to support. For those owning Toys 'R' Us stock, or preferring them as a toy chain, this is only good news, as it removes some competition, and clears the way to control even more of the toy-selling marketplace.

Source: Bloomberg Announcement