KB Toys (Pittsfield, Mass.) filed for bankruptcy protection for the second time in four years and plans to begin going-out-of business sales at its stores immediately.
According to the Associated Press, the 86-year-old company announced that its debt is “directly attributable to a sudden and sharp decline in consumer sales” because of the poor economy. In the filing in U.S. Bankruptcy Court in Delaware, KB Toys said that between Oct. 5 and Dec. 8 same-store sales dropped almost 20 percent.
The company plans to begin liquidating its stores via immediate going-out-of-business sales and to sell its wholesale distribution business.
KB Toys stated in the filing that it had debts between $100 million and $500 million and total assets in the same range. The toy retailer owes Hong Kong-based toy manufacturer Li & Fung about $27.2 million, El Segundo, Calif.-based Mattel Toys $1.3 million and St. Louis-based Energizer Battery more than $728,000. Other creditors are Hasbro Inc. and the maker of Legos.
The toy retailer operates 277 mall-based stores, 40 KB Toy Works stores which are mainly in strip malls, 114 outlet stores and 30 short-term holiday stores.
KB Toys filed for bankruptcy in 2004 and emerged nearly two years later as a subsidiary of investment firm Prentice Capital Management, which owns 90 percent of the company's common stock. During that bankruptcy, KB sold its retail Internet operation to eToys Direct Inc., cut the number of retail stores from 1200 to 650, and closed a distribution center.