KB Toys gets okay to prepare for liquidation sales - East Valley Tribune: Business

KB Toys gets okay to prepare for liquidation sales

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Posted: Thursday, December 11, 2008 10:23 pm | Updated: 11:22 pm, Fri Oct 7, 2011.

A bankruptcy judge says KB Toys can use its existing cash management system and continue to pay employees as it prepares for going-out-of-business sales. The nation's largest mall-based toy retailer filed for Chapter 11 bankruptcy protection and said it will begin liquidation sales.

 A bankruptcy judge says KB Toys can use its existing cash management system and continue to pay employees as it prepares for going-out-of-business sales. The nation's largest mall-based toy retailer filed for Chapter 11 bankruptcy protection and said it will begin liquidation sales.

Judge Kevin Carey granted all of the Pittsfield, Mass.-based company's first-day motions Friday but indicated he wants to see more details of the company's bankruptcy plan.

The judge wondered why the retailer waited until just two weeks before Christmas to seek bankruptcy protection. An attorney for KB Toys says the company did its best to try to plug a looming liquidity problem but was beset by slow holiday-season sales.

Locally, it seemed to be business as usual for the KB Toys store at Fiesta Mall in Mesa. Like other mall retailers, the store was offering deep discounts.Signs advertised 60 percent off sales on store merchandise and buy-two-get-one-free deals on things including board games and Nerf toys.

Store managers were being instructed not to comment on the company's woes to the media. A man who identified himself as the manager at the KB store at Arizona Mills mall referred calls to a company phone number that went to voicemail.KB Toys had 10,850 employees as of Dec. 5 and 461 stores across the nation, said Sean McGowan, an retail toy store analyst with Needham & Co., a New York City-based investment bank and asset management company.

"They're going to be shutting down all of these stores," he said. "The creditor committee will just hire somebody to manage the liquidation process, and there will be lots of low-priced toys."McGowan said the company has been saddled for years by a number of challenges including increasing competition from other retailers - especially Wal-Mart - as well as declining traffic in the nation's malls, where the retailer operates 277 stores.

Those were factors that led to the company's first bankruptcy in 2004 and have continued to hinder the company ever since, he said.

In addition to Fiesta Mall and Arizona Mills, other KB Toy stores in the East Valley are at Chandler Fashion Center in Chandler and Superstition Springs Center in Mesa.

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