FAO parent to file for bankruptcy protection; seeks buyer for chains

FAO Inc. hopes to find a buyer by Dec. 15 for its FAO Schwarz and Right Start toy-store chains while liquidating its Zany Brainy stores, the company said in a statement. The company, based in King of Prussia near Philadelphia, said it could liquidate the other two chains if it cannot find a buyer for them.

Stores will remain open while FAO searches for a buyer, but all sales will be final, the company said. Meanwhile, FAO will significantly reduce its nonstore staff in the next few days.

Sales from its retail stores, its catalog, and the Internet have been significantly below expectations in the early part of the holiday shopping season, the company has said.

Chains such as Wal-Mart Stores Inc. and Target have been offering deep discounts on toys this season to lure shoppers, while a revitalized Toys "R" Us now boasts revamped stores, competitive prices, and a strong toy selection, analysts said.

"Whether or not somebody can come along and revive FAO and keep that going is anyone's guess," said Sean McGowan, a toy industry analyst with Harris Nesbitt in New York.

The company said in September its sales for the quarter ended Aug. 2 had dropped 49 percent to $46.3 million from $90 million a year earlier, and reported an $18.8 million loss for the quarter.

FAO, through an outside spokesman, declined to release updated sales figures or characterize seasonal sales yesterday.