FAO Schwarz CEO on Holiday Shopping Season

This is a rush transcript from "Your World With Neil Cavuto," November 27, 2008. This copy may not be in its final form and may be updated.

BRIAN SULLIVAN, GUEST HOST: Well, as you gather around the table or perhaps get ready to nap off the effect of the turkey, here's something to give thanks for: gas prices keep falling. We just talked about it. The average price of a gallon now well below $2, and that should, should act as a stealth tax cut and put more money into your pockets.

Will those savings translating into higher holiday sales? Let's ask someone knows. Ed Schmults is the CEO of famed toy store FAO Schwarz, and he joins us now.

Hey, welcome.


Video: Watch the interview

SULLIVAN: Happy Thanksgiving. First off, are you going to be offering any door buster specials, or is everything kind of a door buster there at FAO?

SCHMULTS: We do not play that game, that's the larger retailers have so much more marketing dollars. And as you said in that story, people are looking for gadgets. We will have some special offers for our customers in our stores and online and in our Macy's shops this weekend. But we do not have people lining up at 4:00 in the morning.

SULLIVAN: Now every time I am dragged into your flagship here just off Central Park by my daughter, it is also near the Apple Store, which I think probably gives you an extra boost, it is packed, but are people spending?

SCHMULTS: Well, it is interesting. We had a solid year going right until the end of October. And the last three weeks traffic dropped off dramatically. You asked me a week ago if Santa was coming I might say he would have brought you that lump of coal you mentioned earlier. This week it looks like you might get what you want. Business has picked up appreciably; I think the holiday is here. People are starting to get into the shopping mood, but November was a really scary month, not just for FAO Schwarz.

SULLIVAN: So the message to the doom and gloomers out there is, yes, Virginia, there will be a Christmas this year?

SCHMULTS: I have got to believe.

SULLIVAN: All right. Well, we talked about gas prices. And there are some — I can't remember the exact numbers. But it's something like, you know, for every quarter drop in the price of a gallon of gas, it's an extra $5 a month in people's pockets, or something like that.


SULLIVAN: It is a stealth tax cut, Ed. Do you think that will translate into higher sales?

SCHMULTS: I do not know. I'd like to believe so. It is a very efficient tax cut, because that money gets there quickly, the government takes its time.

SULLIVAN: Yes, it doesn't have to go through the government, we get it right back at the pump.

SCHMULTS: Right. But I think the — what happened last year or earlier this year was so scary, you know, people are not rushing out to buy hummers because of that. I think you're seeing a societal change. Some of that will go to pockets of customers. I think across this country, I'm excited about our Macy's opportunities, because those people are driving. It's relatively less expensive now to go visit a Macy's and stock up on things.

Here in New York City, people use mass transit that is probably less of an impact. But I don't think all of that is going to go retail sales. Some of it is going to go to pay down debt, make people feel more secure in this weak economy.

SULLIVAN: All right. Well, I know she is not watching, because I can't compete with Little Bear. So I can talk about it. What am I buying my daughter for Christmas this year? What's hot?

SCHMULTS: We've got a lot of interesting things that are really hot. The hottest thing, and I have been at the company over three years now, we have a make your own Muppet Whatnot Workshop. You come into our store...

SULLIVAN: Can you say that 10 times fast.


SCHMULTS: All right., and you can get a Muppet kit. You can build your own Muppet, hair, eyes, nose, wild outfit. The Whatnots, as you recall, are those crazy characters in the background of the movies, twice our aggressive presentation — sorry, aggressive sales expectation. Adults and kids are buying this, fantastic...


SULLIVAN: The Whatnot Muppet...

SCHMULTS: Workshop.

SULLIVAN: Workshop.


SULLIVAN: And Beaker, you know, we'll move on past Beaker. What else is going to be hot?

SCHMULTS: We have got a lot of items under $20 this year. And these are sort of classic toys, FAO Schwarz...

SULLIVAN: That is obviously by design.

SCHMULTS: Yes, and we started this last year. Items under $20, FAO Schwarz branded number one item, the old Jack-in-the-Box. I think it makes people feel good. It's a classic toy. Bear pops up, everybody is happy, we're selling a lot of that...


SULLIVAN: Not to be a Scrooge, but this year more than most we have seen a number of lead paint scares, many toys from China, have had concerns, and there are parents out there that are worried.


SULLIVAN: Are you carrying more American-made or non-toxic-type products?

SCHMULTS: Well, all of our toys are non-toxic. We are very proud that last summer other than Thomas the Tank Engine, we did not carry any of those toys that were recalled. So we tend to focus on quality toys at FAO Schwarz. Having said that, we do have an expanded line of green toys, these are organic Teddy Bears for infants, wooden toys that are sustainably harvested and painted with a water-based paints or soy-based paints, things like that. Those are doing very well for us this holiday season.

SULLIVAN: All right. Ed Schmults, CEO of FAO Schwarz, have a happy holiday season. I know tomorrow is Black Friday, it's a big day, some come back and talk to us about how things are going.

SCHMULTS: Thanks very much.


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