FAO Sees Sluggish Holiday Sales, Asks Vendors For Help

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FAO Inc. said Friday its retail, catalog and Internet sales "had been disappointing and significantly below expectations."


The King of Prussia, PA-based company added that it had not realized the improvement in sales it anticipated from its initial holiday marketing efforts that began last weekend.


Assuming a continuation of the trend observed in the past week, the company said that it probably would not have adequate liquidity to operate its business normally in November and that liquidity in December would depend on whether the sales trend improves through the holidays.


It was asking "certain of its vendors" in the near term to reduce shipments and most vendors to extend payment dates to the first of the year. It also provided no assurances that its vendors would relax terms. The company also requested an "overadvance" from its lenders that could lead to them issuing a notice of default.


FAO previously announced that it had engaged an investment banker to assist it in raising capital. It has expanded the assignment to include a review of strategic alternatives, including a sale of the company, but made no assurances that any alternatives would be available or, if available, would be acceptable.


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