The holiday season that did in the iconic toy retailer FAO Schwartz claimed another victim (at least temporarily) today when the 1300-store KB Toys chain filed for Chapter 11 bankruptcy.  KB, which is controlled by the private investment firm Bain Capital, also announced that it had obtained debtor-in-possession financing from the Fleet Retail Group, and that it hoped to emerge from Chapter 11 before the 2004 holiday season.  KB, which has annual sales totaling some $1.5 billion, listed $507 million in assets and liabilities of $461 million.  KB, which has been slow in paying suppliers (see 'KB Toys Cuts Cash to Suppliers'), owes some $15 million to its chief creditor, toy giant Hasbro.

KB fell victim to the intense price competition among toy retailers orchestrated by Wal-Mart during the 2003 holiday season (see 'Wal-Mart Applying Toy Category Kill Shot').  FAO, which had emerged from bankruptcy earlier in 2003, simply had no chance in the ruthless environment of the 2003 holiday season.  Even the strongest of Wal-Mart's toy retailing competitors, Toys R Us, the nation's second-leading toy seller, has had to lower its earnings forecast for the year thanks to a poor Q4 performance.  Jim Silver, editor of the trade publication Toy Book, summarized the situation succinctly:  'For any pure toy retailer whose profit structure is based on selling toys in the fourth quarter, Wal-Mart took away the chance for any of these retailers to be successful this holiday season.'