Bon-Ton adds FAO Schwarz to boost holiday toy sales

Dive Brief:

Bon-Ton Stores on Thursday announced this holiday season it's bringing the full assortment of iconic toy brand FAO Schwarz to 186 of its department stores and online, according to a company press release.
Stores carrying the merchandise will include Bon-Ton, Boston Store, Bergner's, Carson's, Elder-Beerman, Herberger's and Younkers banners.The tie-up will launch Nov. 4 with a ribbon-cutting ceremony hosted by store managers and the first 25 children at each location will receive a special gift and a photo opportunity, the company said.
Also last week, people familiar with the matter told Bloomberg that private equity firm Sycamore Partners has reportedly held talks with Bon-Ton regarding a potential deal to acquire its assets. The firm is seeking to raise $4 billion by January to invest in more ailing retailers.

Dive Insight:

This holiday partnership brings together two retailers that are operating as scaled-down versions of their former selves. Last month, Debtwire reported that financial firm CIT had reduced its factoring exposure to Bon-Ton, forcing some suppliers to work with the retailer directly rather than meet CIT’s stricter terms for shipments to Bon-Ton. Several suppliers are scaling back shipments to Bon-Ton and asking for stricter payment terms. Last month, Bon-Ton was reported to have hired AlixPartners for help with its turnaround efforts, and now Bon-Ton seems to be the latest on Sycamore's retail wish list.

The private equity group has doubled down on retail this year. Most recently, it acquired Staples for $6.9 billion and it also has interest in The Limited, Belk, Hot Topic, Dollar Express, Talbots and Nine West, among others.

Buying Bon-Ton would be a bit of a gamble. The retailer's top-line sales have been falling since 2007, and the retailer hasn’t posted a profit since 2010, according to regulatory filings. Comparable sales for Bon-Ton have been negative for the past nine quarters, according to an August report from Moody’s. In Q1 of this year, comparable sales fell by 8.8% — the worst among its department store peers with the exception of Sears, according to Moody’s. In the second quarter, comps fell by 6.1%.

As Philip Emma, a retail analyst with Debtwire, pointed out in an October report emailed to Retail Dive, Bon-Ton had been able to cut overhead to improve margins in the face of declining sales, but "there is a finite level of costs that can be taken out of a retailer without having a serious impact on the ability to reverse a traffic decline."

FAO Schwarz, meanwhile, a year ago was sold by now-bankrupt Toys R Us to ThreeSixty Group, a company that designs and sells consumer products including toys and home goods, for an undisclosed amount.

Famous for its store’s floor piano, human toy soldiers and intricate toy trains, FAO Schwarz was founded in 1862 and became known for its Fifth Avenue store in the General Motors Building in Manhattan, where rents are among the highest in the world. Toys R Us initially bought FAO Schwarz in 2009, but last year the toy retailer shuttered the iconic 45,000-square-foot, three-level store flagship Midtown store to save money. (That store is now an Under Armour location.)

FAO Schwarz is bringing back updated renditions of some of the best-loved items and some new favorites for the toy chest including that famous Piano Mat for $130, FAO Schwarz 2017 Anniversary plush animals for $50 each, a $99 interactive motorized train set, a $160 "British Bomber" drone, ride-on toys including a $1,000 Mercedes and $270 Roadster and remote-controlled 1950s-era bumper cars for $60.

This story is part of our ongoing coverage of the 2017 holiday shopping season. You can browse our holiday page and sign up for our holiday newsletter for more stories.