Toys ‘R’ Us snaps up FAO Schwarz

May 28, 2009 by Emily Claire Afan

It looks like two of the biggest names in the toy retail business are joining forces, as Toys ‘R’ Us acquires high-end specialty retailer FAO Schwarz.

Following the deal, TRU plans to operate the two flagship FAO brick-and-mortar shops in New York and Las Vegas and its e-commerce and catalog operations under the FAO Schwarz name. In the meantime, all merch, management, distribution and marketing operations will transition to TRU. The US’s largest dedicated toy retailer did not disclose the terms of the deal.

This is the second time in the last six years that FAO has changed hands. Following two consecutive Chapter 11 filings, FAO Schwarz went up on the block in December 2003 and was purchased by New York investment firm D.E. Shaw Group at auction in January 2004 for a reported US$41 million. And last year, the legendary retailer made moves to widen bricks-and-mortar distribution through an in-store boutique deal with department store Macy’s, opening a 5,200-square-foot shop in Macy’s Chicago State Street Store and making plans to roll out smaller ones across the mid-tier chain’s 675 locations.

TRU, meanwhile, is viewing the acquisition as an opportunity to grow its share of the toy specialist market and is offering employment opps to FAO associates in the New York and Las Vegas stores.