FAO Inc. came out swinging yesterday as it responded to a story that appeared Friday in the New York Post that carried the headline, “FAO Cash Crunch. Chain's future may hinge on Xmas sales.”
The company stated that:
· It is not experiencing a cash crunch and is paying its bills and funding operations in the normal course of business.
· Its suppliers had not been tightening merchandise credit limits and … credit limits have been expanding.
· Inventory has been flowing from its suppliers as planned and “was, predictably, at the highest levels of the year.”
· It has not been trying to value its FAO Schwarz flagship store lease and has no intention of moving from that location.
FAO also reaffirmed its earlier assessment of its liquidity provided in its report for the second quarter, saying that it expects to generate enough operating income in the fourth quarter to offset losses typically experienced in the first three quarters of the year.
It also said that in line with its previous disclosure in its quarterly report, it may need to raise more capital in an amount to be decided after the holiday season and noted that sales trend figures disclosed to vendors in August had moderated.
The tabloid said that the toy retailer “appears dangerously close to running out of money just six months after emerging from bankruptcy protection,” citing “industry observers.” The Post also described the situation as “not all gloomy” as the company “has begun opening boutiques in Saks Department Stores through an agreement that saw Saks become a major shareholder in the toy retailer.”
The story also cited company filings in stating that the company's “decline in same-store sales has slowed from a 36 percent drop in May to an 11 percent dip in August.”