Holiday shoppers looking to strike toy bargains aren't just heading to the old standbys -- Wal-Mart (NYSE:WMT), Target (NYSE:TGT) and Toys "R" Us (NYSE:TOY). They are donning their scavenger suits for a trek out to the nearest FAO Schwarz (OTC: FAOOQ) store.

Why now? The crumbling toy empire of 15 namesake stores and another 127 Zany Brainy and The Right Start locations shifted into inventory-clearance mode last week after the company filed for Chapter 11 bankruptcy protection.

Might this be the handiwork of Ebenezer Scrooge or maybe even The Grinch? Closing a landmark toy store with the peak holiday season just upon us? Bah humbug! Then again, if you've got to unload surplus playthings, better now than in mid-January. Still, it seems sad.

After all, while FAO Schwarz and Zany Brainy do stock the mass wish-list output of Hasbro (NYSE:HAS), Mattel (NYSE:MAT), and LeapFrog (NYSE:LF), the stores are much more interactive and feature higher-end dolls and wood toys you just won't find at your local Kmart (NASDAQ:KMRT). So, if you're a penny pincher looking for something off the beaten path, these sales don't come around too often.

Thankfully FAO's portfolio of stores had been whittled down in recent years. Otherwise, the ripple of one retailer's going out of business sale could create a damaging wave for rival stores.

If FAO does go away, a piece of history will go with it, but that isn't likely. Already, at least one suitor has gone public with his intentions. Businessman Ken Hakuta may have little retail experience but may be just what FAO needs. His media savvy got his Wacky Wallwalker featured on CBS Evening News in the 1980s. Sensing that 15 minutes tick awfully fast on toys, he opted for a direct distribution model, selling 200 million Wallwalkers in its first year on the market.

Yet, something tells me Hakuta may not be alone. FAO might very well stand for Find Another Owner. I can see a sleepy department store chain like Sears (NYSE:S) or J.C. Penney (NYSE:JCP) making the move as a way to upgrade its image, much as Sears has done by acquiring Lands' End and Structure.

Just watch. This story doesn't have to have an unhappy ending.

Have any penny-pinching plans to make this holiday season lighter on your wallet? What are the pitfalls of clearance sales, beyond the "No Returns" policy? Are handcrafted gifts cheap or charming? All this and more -- in the Living Below Your Means discussion board. Only on