Massive layoffs at KB

Posted
Friday, December 12
PITTSFIELD — KB Toys filed for Chapter 11 bankruptcy protection in Delaware on Thursday and plans to lay off 240 of its 270 employees at its corporate headquarters at 100 West St. between now and February, The Eagle has learned.

The Pittsfield-based national toy retailer blamed dismal holiday shopping returns for the move, its second Chapter 11 filing since 2004.

In its filing in U.S. Bankruptcy Court in Wilmington, Del., KB was hit by "a sudden and sharp decline in consumer sales due to macro-economic concerns," according to The New York Times, quoting documents from the Delaware court.

Staring down a bad economy, KB Toys aimed to lure holiday shoppers to stores when it announced in October that more than 200 toys in its retail stores would be reduced to $10 or less. The move fell short, apparently. KB's holiday sales plummeted 20 percent this year over last.

KB intends to close its retail stores — 277 shopping mall locations, 114 outlets, 40 KB Toy Works stores, and 30 holiday stores — and sell its wholesale distribution business. Going out-of-business sales will begin immediately.

The firm's Berkshire County stores are located at the Allendale Shopping Center in Pittsfield and at the Prime Outlets in Lee. The firm closed its Berkshire Mall store last year. The company employs 10,850 people, approximately 6,500 of whom are seasonal workers.

KB Toys officials, including CEO Andrew Bailen and spokesman Geoffrey Webb, did not return calls for comment. The company also did not release a statement beyond the court filing.

Nancy Moffett, 47, a KB Toys employee for more than 18 years, said workers were given the news in the cafeteria at 8:30 a.m. Thursday.

"There were a lot of tears," said Moffett, whose job is to monitor stores' inventory levels and ship toys. "It's very sad. I bought my house because of this job. I raised my kids because of this job."

Layoffs are expected to happen in phases over the next several weeks.

Moffett said it was too early for workers to start talking about what was next. She described the scene at headquarters as "somber" as long-time employees reminisced and spoke about the "family" that was being broken apart.

"I think we're still in shock," she said. "Most of us have been working here for decades."

Moffett said the company had been surviving until October, when sales started to dip.

"It's nobody's fault, it's just the economy," she said. "We have a terrific CEO. Andy put his blood, sweat and tears into this place. He did everything he could."

The 86-year-old company, the country's largest mall-based toy chain, emerged from its first Chapter 11 bankruptcy in September 2005 under Prentice Capital Management, which owns 90 percent of the business. In that case, it closed 600 stores and laid off 3,400 employees.

Filing for Chapter 11 bankruptcy rather than Chapter 7 liquidation allows a company to maintain greater control of its assets.

On Thursday, KB Toys listed its assets at between $100 million and $500 million and estimated it owes more than $190 million to more than 25,000 creditors. Its largest creditors include a China toy company, to which KB owes more than $27 million, according to court documents. It also owes $1.3 million to the California-based Mattel Toys company, $728,000 to the Energizer Battery company of St. Louis, and $672,000 to WorkflowOne of Pittsburgh, a marketing company.

KB also listed debts ranging from $75,000 to $436,000 to 37 other companies.

"The liquidity crisis is directly attributable to a sudden and sharp decline in consumer sales," said Controller Raymond Borst in court documents.

Mayor James M. Ruberto said he had been informed by KB Toys that the company planned to file for Chapter 11 bankruptcy protection on Thursday. But Ruberto said he was out of the office most of the day on previous commitments and declined comment until he received more information.

"Communities and families across the nation are being impacted by layoffs and company closures, and unfortunately today, this came home to the Berkshires with the news about KB's Chapter 11 filing," said David M. Rooney, the president of the Berkshire Economic Development Corporation, in a written statement.

"Our immediate regional focus now will be on supporting those who lost their jobs with placement and assistance programs through the vital work of the Regional Employment Board and BerkshireWorks to help our friends and neighbors find new employment and weather this storm."

The BerkshireWorks Career Center in Pittsfield has scheduled two sessions on Monday to review career options and rapid response services with laidoff KB Toys employees, said Heather P. Boulger, the executive director of the Berkshire Regional Employment Board. The sessions are scheduled for 9:30 and 11 a.m.

"This has been a challenging year with the economy the way it is," Boulger said. "We've been getting calls from companies laying off five people or 10 employees. But having layoffs of this magnitude is overwhelming.

"It's devastating," she said. "We feel terrible for all the families who are impacted."

Berkshire Chamber of Commerce President and CEO Michael Supranowicz was also saddened by the news.

"It's really unfortunate because KB has tried so so hard over the last few years to be a successful company in a very, very difficult competitive market," Supranowicz said. "They've been such a great company for so many years in Pittsfield. I just feel so bad for all the employees. This time of year is always a difficult time for these things to happen."

Employees who were interviewed leaving work Thursday said they weren't blaming company officials.

"What are you going to do? It's the economy," said a man wearing a black KB Toys fleece jacket who did not give his name. "You can't control it, but it's still disappointing."

The news comes three days after Sabic Innovative Plastics, which also maintains its corporate headquarters in Pittsfield, announced that it would lay off more than 10 percent of its local work force. Unlike Sabic, KB Toys does not have a Tax Increment Finance agreement, or TIF, with the city of Pittsfield.

Material from various wire services was used in this report.

KB Toys chronology

Today, KB Toys Inc. is the nation's largest mall-based toy retailer, operates shopping mall locations, 114 outlets, 40 KB Toy Works stores, and 30 holiday stores stores in 44 states, Guam and Puerto Rico. It operates stores in three distinct formats KB Toys, KB Toy Works, and KB Toy Outlet. KB has two stores in Berkshire County, in Pittsfield's Allendale Shopping Center and the Lee Prime Outlets. At its peak, KB had 1,200 stores.

1922: Brothers Donald and Richard Kaufman open a wholesale candy business in Pittsfield.

1940s: The brothers acquire a toy company as payment for an outstanding debt, and begin to expand it.

1948: The toy company thriving, the brothers decide to focus on it exclusively, and get out of the candy business.

1973: The company moves from wholesaling to retailing toys, calling itself Kay-Bee Toy & Hobby. It has 26 stores.

1977: Its name changes to Kay-Bee Toy and Hobby Shops Inc.

1981: The company is purchased by Melville Corp. The company runs 210 locations. Its name changes to Kay-Bee Toy Stores. Company president Richard Kaufman retires.

1982: Kay-Bee acquires Toy World's 52 stores; acquires Circus World's 330 stores.

1991: Kay-Bee acquires K&K Toys' 133 stores.

1993-94: Kay-Bee closes about 250 underperforming stores in major restructuring.

1994: Kay-Bee expands its mall locations, starts free-standing Toy Works stores, and becomes a direct competitor with Toys 'R' Us.

1996: Despite stiff competition from big box retailers, sales increase to $1.1 billion. Melville Corp. sells Kay-Bee to Consolidated Stores Corp. for $300 million.

1998: KB's annual sales reach $1.6 billion. Its online merchandising Web site KBkids.com is launched. Its store logo is changed to KB.

2000: Company comes under control of Bain Capital LLC of Boston.

January 2004: The company files for bankruptcy protection, closes more than 600 stores and lays off more than 3,400 employees.

September 2005: Company emerges from Chapter 11, under 90 percent ownership of Prentice Capital Management.

2006: Andrew Bailen replaces Greg Staley as KB Toys president and CEO.

February 2007: KB Toys closes its store at the Berkshire Mall.

August 2007: The company unveils a strategy to re-establish itself as a discount "value" store. KB's "shrink to grow" includes some layoffs at the Pittsfield headquarters.

November 2007: KB Toys begins closing 122 of its 566 stores.

October 2008: KB Toys announces that more than 200 toys in its retail stores will be reduced to $10 or less as the holiday buying season approaches amid a shaky, sliding economy.

Dec. 11, 2008: KB Toys files for bankrupcty and announces plans to liquidate its assets.

Sources: International Directory of Company Histories, Eagle archives, KB Toys Web site, Wall Street Journal.

If out of work ...

To learn more about unemployment benefits or to file a claim:

Visit: Berkshire Works Career Center, located at 160 North St., Pittsfield or 37 Main St., North Adams.

Call: (413) 499-2220, (413) 663-1111. You can also reach a TeleClaim service at 1-877-626-6800.

Log on: www.mass.gov/dua.

Unemployment benefits

Most people who receive unemployment receive a weekly payment equivalent to half their average weekly wage, up to a maximum of $628.

Unemployment's duration of benefits — the maximum number of weeks you would be able to collect benefits — is determined by the total amount of your wages paid and the amount of your benefit rate. The maximum number of weeks someone can collect full benefits is 30 weeks.

However, many individuals qualify for less than 30 weeks of coverage. The maximum benefit credit amount is $18,840, which equals $628 a week for 30 weeks.

If you are the sole or main support of your children, you may be eligible for a weekly dependency allowance of $25 per dependent child.

Source: www.mass.gov/dua


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