Pittsfield, Mass.—KB Toys said today in a newly filed Chapter 11 bankruptcy petition that it plans to begin going-out-of-business sales at all of its retail stores immediately.
The move was the result of a “sudden and sharp decline in consumer sales due to macro-economic concerns,” according to KB Toys vice president and comptroller Raymond Borst in the company's filing. In particular, he pointed to a nearly 20 percent drop in same-store sales between Oct. 5, 2008, and Dec. 8, 2008. In the previous eight months of its fiscal year, same-store sales had been up 0.36 percent.
"In light of, among other things, the erosion in sales, the Debtors reviewed their liquidity needs and investigated a number of potential alternatives to address their projected liquidity shortfall," Borst said in an affidavit supporting the move. "None of those potential alternatives, however, proved to be viable and thus, it became apparent that the liquidation of their retail-based operations through expedited and orderly going-out-of-business sales within chapter 11 was the best option for the Debtors to maximize the value of their business."
In addition to closing its 277 mall-based stores, 40 KB Toy Works stores and 114 outlet stores, KB plans to sell its wholesale business, Creative Innovations & Sourcing, which supplies toys to retailers CVS Pharmacy and Supervalu, and home shopping network QVC. The company also operates 30 temporary "Holiday Stores."
KB employs approximately 4,400 full-time workers and more than 6,500 seasonal employees.
As of Nov. 29, on a consolidated basis, KB Toys had assets worth approximately $241 million and total liabilities of approximately $362 million. The liabilities consist of approximately $127 million in senior secured claims (inclusive of approximately $29 million of outstanding letters of credit) and approximately $143 million of unsecured claims including, outstanding trade payables and other accrued liabilities, according to government documents. The retailer said it has annual sales of approximately $480 million.
A list of KB's largest creditors can be found here.