KB's loss could be Target's gain

As one of the nation’s largest toy retailers, Target is poised to benefit from the demise of KB Toys, as the toy specialist’s filing for Chapter 11 will likely result in the elimination of toy selling capacity.

KB Toys became the latest retailer to fall victim to the difficult economy when it filed for Chapter 11 bankruptcy protection following a significant drop in sales at its 277 stores. The retailer reported that same-store sales from the period between Oct. 5 and Dec. 8 fell nearly 20%. In its filing in U.S. Bankruptcy Court in Delaware, KB stated that it had debts between $100 million and $500 million and total assets in the same range.

The company said that it plans to close all of its stores and begin liquidation sales in the middle of the holiday season.

Back in January 2004, KB filed for reorganization under Chapter 11 after a dismal holiday selling period, only to later to emerge from bankruptcy in August 2005. This time around, the retailer isn’t waiting to see how the holidays turn out. Though the season is a critical time for most toy retailers, according to The NPD Group, toy sales are expected to be flat or down slightly from last year, so KB isn’t holding its breath.