Grim Warning from FAO

In a terse statement on Nov. 7, King of Prussia, PA-based FAO admitted that retail, catalog, and Internet sales following its initial holiday marketing efforts have been “disappointing and significantly below expectations.” Should this trend continue, FAO believes it would not have adequate liquidity to operate its business “normally” through the rest of November and December.

The parent company of toys cataloger/retailer FAO Schwarz, children’s merchandise cataloger/retailer The Right Stuff, and toys retailer Zany Brainy is asking certain vendors to reduce shipments. It’s also asking most vendors to extend payment dates to the first of the year. FAO, which gave no assurances that its vendors would relax terms as requested, also requested an overadvance from its lenders, which could lead to its lenders issuing a notice of default.