KB Toys files for bankruptcy, plans to close stores

The Baltimore Sun

HACKENSACK, N.J. - KB Toys Inc., a once-thriving toy seller that has been in failing financial health for the past decade, declared "game over" yesterday, filing for bankruptcy protection and telling the court it plans to liquidate all of its stores.

KB blamed the difficult economy for the filing, but toy industry experts said wrong decisions by the retailer hastened its demise. It shifted its focus to mall-based stores, saddling itself with high rents just as shopping-center traffic was dropping, it stopped selling video game consoles and it moved its merchandise mix away from hot toys and toward closeouts.

This is the second time in four years the Pittsfield, Mass.-based retailer has filed for bankruptcy. It emerged from a 2004 bankruptcy filing in 2005, after closing more than half of the more than 1,200 stores it had at its peak. The company has five stores in the Baltimore area and 11 in Maryland, according to its Web site.

"There was a growing feeling that [bankruptcy] was an inevitability," said Sean McGowan, an analyst with Needham & Co. who covers the toy industry. "The industry still is not growing, their cost structure is still too high, and Wal-Mart isn't any smaller than it was back then."

KB executives did not respond to requests for comment yesterday. Raymond Borst, vice president and controller of KB, in an affidavit filed yesterday with U.S. Bankruptcy Court in Delaware, said that between Oct. 5 and Monday, KB's sales plunged nearly 20 percent compared with the same period in 2007. Before October, sales had been up 0.3 percent for the year.

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