Can Toys R Us afford FAO Schwarz?

On Thursday, Toys R Us announced that it has purchased boutique toy store FAO Schwarz. Schwarz, the iconic Manhattan wonderland featured in the movie Big, has declared bankruptcy twice amid competition from discount stores. Toys R Us has had its own financial difficulties: in 2006, a group of investors bought it for the relatively bargain-basement price of $6.6 billion.

On the surface, FAO Schwarz and Toys R Us seem to have wildly divergent personalities, at least in New York. The Schwarz store on Central Park South and Fifth Avenue is what might emerge if Jane Austen went into toy marketing. It is calm and relaxed (for a toy store, at least), with a bright, helpful staff and beautifully arranged displays. Many of the toy stations are interactive, so visitors can design and construct their own muppets, dolls or matchbox cars. Moreover, the most hideously expensive toys are seamlessly integrated with more reasonable offerings, making it possible for parents to bait-and-switch their children away from the thousand-dollar stuffed dragons and Barbie condominiums. In short, it is the kind of store that parents don't mind going to and kids adore, with prices that are good for the occasional splurge, but a little too high for any sort of regular visiting.