A New Right Start for FAO Schwarz

The landmark FAO Schwarz store on New York's Fifth Avenue is one of the venerable toy retailer's assets being sold to The Right Start (Calabasas, Calif.) under the terms of a $55 million acquisition.

According to the deal, The Right Start – which operates nearly 250 toy stores around the country — will take over FAO Schwarz's 22 stores, Internet and catalogue operations and rights to the FAO Schwarz name.

The company said it plans to capitalize on the FAO Schwarz brand, which offers luxury cachet at a time when mega-chains such as Toys “R” Us and Wal-Mart dominate the toy industry.

The former FAO Schwarz owner, Netherlands-based Royal Vendex, had said in September that it planned to sell its 140-year-old U.S. retail property, which had been losing customers to less-expensive toy stores for some time and had lost $17 million in the first six months this year. Sales in the past three months slipped 22 percent from a year before, hurt by the one-week closure of the Fifth Avenue store after the events of September 11.

The Right Start, which began in 1985 specializing in upscale, educational child and baby items, acquired the assets to like-minded high-end rival Zany Brainy in August. (Zany Brainy had been forced to declare bankruptcy earlier in the summer, in part due to its own acquisition of competing retailer Noodle Kidoodle.) The company had been operating more than 60 Right Start stores in 16 states, and the Zany Brainy acquisition gave it an additional 180 stores. It had been closing several mall locations this year in favor of street stores.

“The three chains are a perfect fit,” said Right Start ceo Jerry Welch. “All three brands cater to the same discerning customer, yet each company focuses on a different product offering and a different positioning with the customer.”

FAO Schwarz, which also operates a few freestanding FAO Schweetz candy stores, was founded in 1862 by Frederick August Otto Schwarz.