FAO Schwarz makes international push and plans return to New York ahead of first Christmas without Toys R Us  

Key Points
  • In the U.S., FAO Schwarz will open its flagship store at 30 Rockefeller Plaza in New York on Nov. 16.
  • It's planning to open permanent stores across Canada and China, in partnerships with other retailers.
  • FAO Schwarz will also have pop-up shops in Spain, Australia and London for the holiday season.
The inside of one of the mini FAO Schwarz shops within Hudson's Bay in Canada.
FAO Schwarz

Toy retailer FAO Schwarz is making a massive global push ahead of this holiday season, just months after Toys R Us filed for bankruptcy and liquidated hundreds of stores across the U.S.

It plans to set up a permanent presence in Canada and China and open pop-up shops in Spain, Australia and London.

In the U.S., FAO Schwarz will return to New York, by opening a permanent flagship store at 30 Rockefeller Plaza on Nov. 16, marking its comeback in the city after shuttering its famed location on Fifth Avenue in 2015. At the time, the company fell victim to rising rents and heightened competition from online retailers.

"This brand has a tremendous amount of recognition internationally," David Conn, CEO of ThreeSixty Brands, told CNBC. ThreeSixty Group, ThreeSixty Brand's parent company, acquired FAO Schwarz in October 2016 for an undisclosed amount from Toys R Us, with the goal of taking the business global. Other brands in ThreeSixty Group's portfolio include Sharper Image and Discovery Kids.

FAO Schwarz will be partnering with five companies to grow its business overseas.

In Canada, the toy retailer will open permanent but pint-sized shops of up to 1,000 square feet inside nearly 90 Hudson's Bay's department stores. In China, FAO Schwarz is working with Kidsland China — the country's major toy retailer — to open two massive stores, in Beijing and Shanghai, next year. It said it will also open as many as 20 smaller-format toy stores across China over the next few years.

In London, FAO Schwarz has teamed up with Selfridges to open pop-up shops for the holiday season in two of the department store chain's locations, with more in the works for 2019, the company said. In Spain, department store chain El Corte Ingles will host an FAO Schwarz pop-up shop in Madrid this season. And in Australia, Myer Australia will open two FAO Schwarz pop-up shops within its department stores in Sydney and Melbourne later this month.

"Everything we are doing revolves around 30 Rock. ... That's the anchor," Conn said. "The idea is that no matter where you are in the world, the stores will look and feel like the anchor."

FAO Schwarz's new, New York flagship will be more than 20,000 square feet and feature some of the iconic figures that were in its former Fifth Avenue shop, like a dance-on piano and a colossal clock tower. It will encourage kids and their parents to stay and play by hosting magic shows. It also includes a faux grocery shopping experience and build-your-own race car station.

Conn said the retailer's main focus for the foreseeable future in North America will be on perfecting the shopping experience at 30 Rock and building relationships with department stores, not on opening more freestanding locations. FAO Schwarz will sell inside Kohl's for the first time this holiday season, for example. The company is also starting to roll out tiny stores in U.S. airports in a partnership with Hudson Group. The first is to open at New York's LaGuardia Airport this fall.

"I think the reason we have been embraced so enthusiastically by department stores across the world is they are looking for brands that are experiential and deliver theater and can drive customers into stores," Conn said. "That's our sweet spot."

Toys R Us accounted for up to 15 percent of all toy sales in the U.S. in 2017, leaving a huge piece of the market up for grabs following its demise. However, recent reports said a group of hedge fund owners are now looking to buy some of Toys R Us' assets, including the Babies R Us brand name. It remains to be seen if any such deal will go, through.

Retailers including Target, Walmart, Party City and Kohl's are all trying to take advantage of the hole in the industry, at least for this holiday season.

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