Toys "R" Us and FAO Schwarz couldn't be two more different toy store retailers. If you believe Jerry Storch, chairman and chief executive officer of Toys "R" Us, Inc., that will not change now that his company has completed a deal to purchase the upscale FAO Schwarz business.
"We have enormous respect for the FAO Schwarz brand and for the special place it holds in the hearts of children everywhere," said Mr. Storch in a press release. "Building upon this storied tradition is a responsibility we take very seriously. We will work tirelessly to preserve the distinctiveness and integrity of the FAO Schwarz stores and brand as we grow the business and, indeed, take the brand to even greater heights."
Chris Byrne, director of content at TimetoPlayMag.com, was enthusiastic about the deal. "Financially, I think it's brilliant," he told Bloomberg. "You get all of the cachet and the look of a specialty store and a destination with the operational efficiencies of a giant like Toys "R" Us."
With the acquisition, Toys "R" Us intends to operate FAO Schwarz's flagship store in New York and a store at the Forum Shops at Caesars Palace in Las Vegas. It will also continue to operate its website and catalog business.
One casualty of the deal will be the FAO Schwarz shops operated within Macy's. There are currently 260 of these around the country that will be closed by the end of November.
According to a Chicago Sun-Times report, the FAO Schwarz store inside Macy's State Street location "had done significantly more business than it had anticipated since it opened Nov. 1, 2007. The store, on Macy's fifth floor, attracted so much traffic that it helped increase sales in surrounding children's apparel departments."
Discussion Question: What is your reaction to the deal made by Toys "R" Us to acquire FAO Schwarz? Do you have any advice for Jerry Storch and his management team?