It was game over for the second largest toy retailer when it filed for Chapter 11 bankruptcy on December 10, the second time in four years. While KB Toys' demise had been anticipated, even expected, by many in the industry, the timing came as a surprise as most figured the store would try to hang on through the holidays. By filing Chapter 11, the store retains control over its assets as it tries to liquidate. But that's not necessarily good news for its creditors, which include Hasbro, LEGO and other toy suppliers like Hong Kong-based Li & Fung that may be owed more than $27 million.
Ironically, it was the response to changing times that created KB, just as today's rapidly changing economy has hastened its end. The company was founded in 1922 by the Kaufman Brothers (hence, "KB") as a candy wholesaler. In the 1940s, they acquired a wholesale toy company as payment for outstanding debts. Due to sugar shortages during World War II, the candy business became a difficult enterprise.