F.A.O. Schwarz on Comeback Trail : New Co-Owner Has Fun Reviving Legendary Toy Retailer

Peter L. Harris is one of those disarmingly cheerful people. But at least the California-bred businessman has reason to be.

As the new co-owner and chief executive of the legendary toy retailer F.A.O. Schwarz, Harris is having a great time trying to pull off a financial and critical comeback for the 124-year-old company.

But then to Harris, 42, having a good time is part of the job. He and his new team even stipulated that in Schwarz’s business plan.

“The toy business should be fun,” Harris said. “If employees enjoy what they are doing and laugh and have fun, it translates to the customers.”

When Harris set his sights on the purveyor of the high-priced, the one-of-a-kind--such as $14,000 miniature Lamborghini sports cars--the company had been in a decline.

The 21-store chain was neglected by its owner, a Swiss toy retailer, and hurt by competition from the new, huge toy discounters.

Name Represents Quality

Still, Harris developed high hopes for Schwarz, which remains a relatively small player in the $12.8-billion toy industry. Schwarz has annual sales of about $20 million.

“We see it as a tremendous opportunity because . . . the name remains the ultimate name in the high-end toy business,” Harris said. “The name represents quality, the newest, the most unique in toys.”

He added: “We saw a business that was positioned in a growing market rather than a mature one.”

Yes, yuppies are his market.

Harris cites the familiar demographics: There are more two-income families, couples are waiting later to have children, more parents are having only one child on which they are more likely to spend more money.

Harris just doesn’t see Toys “R” Us and other discounters as his competitors.

“I think there are two very separate and distinct shopper motivations. Each has its own customers,” Harris said.

The centerpiece of Harris’ efforts is a new Schwarz flagship store, which opened in the first week of November just across the street from its famous Fifth Avenue home of more than 50 years.

It is here that Harris is trying to bring back the magic, the whimsy.

“I’ve had a vision, a dream of what the store could be,” Harris said. “What we are trying to do is to create a memorable experience.”

The store, in what was a former auto showroom in the General Motors Building, has a third more space: 40,000 square feet. It is broken up into 80 boutiques on two floors.

Shoppers in a Hurry

The boutiques have cute names such as “Toys of Extinction” (the dinosaur shop) and “Remember When,” which offers a selection of old favorites such as yo-yos and Slinkies.

In keeping with the times, there is a One-Minute Shop near the front door where harried executives quickly can pick up something, pre-wrapped and portable.

There is a children’s hair salon and a for-rent birthday party space. Plus, Schwarz is selling peanut butter--gourmet, of course--and jelly sandwiches. And milk.

But there also are plenty of popular mass-market G.I. Joes and Pound Puppies and Transformers.

In addition, Harris has brought children’s clothes into the store.

As for special effects, the biggest is a 28-foot-tall, computer-driven, animated musical clock in the middle of the store that tells time counterclockwise.

The clock plays a song for 7 1/2 minutes every 15 minutes.

Won’t that drive the salespeople berserk?

“Our employees will get into the spirit and enjoy the song,” Harris said.

Other attractions are a cage-like glass elevator and a life-size cave.

Children will be able to play with toys of all kinds, experience sights, sounds and textures.

Harris does concede that the store might be too much fun, and that it will have to be policed.

“We are not going to let people sort of treat it as a vending machine arcade,” Harris said.

Harris, who talks fast, and a lot, won’t disclose how much he is spending on the store. He also won’t say how much of the company’s sales the flagship is expected to represent.

The toy retailer, which employs about 400 people, was founded in 1862 in Baltimore by German immigrant Frederick August Otto Schwarz and grew to worldwide fame.

The company left the family’s control in the 1960s and was subsequently owned by Parents magazine, then W. R. Grace & Co. and then toy retailer Franz Carl Weber International of Zurich.

Harris, meanwhile, had worked for Lucky Stores, the Dublin, Calif.-based retailer, for 18 years, most recently as president of its Gemco discount chain. He quit in 1984 because he wanted to acquire a retailer on his own.

Failed First Attempt

He failed in his first attempt to acquire Schwarz and instead fell in with Christiana Cos., a San Diego-based investment and real estate company that bought the toy retailer from Weber International for a reported $10.6 million in 1985.

Harris was given a minority position and took the helm.

He immediately hired experienced retailers. He upgraded the company’s computer system so it could respond more quickly to what customers were and weren’t buying.

He cut costs, reducing office staff and closing down Schwarz’s catalogue operation, and he brought in new merchandise and freshened up presentations.

The result, Harris says, is that sales have picked up considerably and the company expects to be profitable this year.

This past March, Harris and a partner, Philadelphia investment banker Peter C. Morse, bought the company from Christiana for a reported $6.5 million. Morse serves as chairman.

Since then, Harris has opened the first of six stores-within-stores he plans in B. Altman department stores. The Altman agreement was the first of what Harris hopes will be many deals with upscale department stores.

Harris also plans to revamp all the branch stores--which are located in such places as Dallas’ Galleria and Chicago’s Water Tower--by the end of 1988.

Harris, who dreams of expanding the chain to 200 stores here and abroad, says he hasn’t ever wanted to be anything but a businessman.

The eldest of four children, he grew up in Stockton, Calif. His father was an optometrist.

He attended Whittier College, where he majored in business administration.

Right out of school, he went to work for Lucky Stores.

“It was (immediately) clear that I loved it and that that’s where I belonged. I’ve been a retailer ever since,” Harris said.

Harris and his wife, Jan, live in New York. They run in Central Park and, in their free time, explore their new hometown.