By 1991, the chain grew to 100 stores and was the fourth-largest toy retailer in the country, but once again ran into trouble due to a combination of factors.

Additionally, Lionel found it difficult to compete on price with the larger Toys "R" Us, and the chain attempted to expand too rapidly in a weakened economy.

[1] In 1992 Lionel attempted to reverse its fortunes by merging with the bankrupt Child World, the United States' #3 toy retailer, but was unable to secure financing.

[2] By February 1993 Lionel had closed all but 29 stores in six states, concentrating on the markets of Philadelphia, central New Jersey, Baltimore, Washington, D.C., Cleveland, Ohio and south Florida.

[3] Unable to reach an agreement for reorganization with its creditors, on June 2, Lionel announced its intention to liquidate all of its stores and go out of business.