Warner Bros. Studio Stores to Close

From Reuters

AOL Time Warner Inc. is gearing up to close its U.S.-based Warner Bros. Studio Stores by the end of October, shedding 3,800 jobs, after failing to find a buyer for the languishing chain, a company spokeswoman said Friday.

"We're in a wind-down process," the spokeswoman said. "Management decided to get out of the owned and operated retail business."

In January, after completing the $106.2-billion deal combining America Online and Time Warner Inc., AOL Time Warner said it would look for a buyer for the retail unit, which sells merchandise featuring Warner Bros. characters such as Bugs Bunny. The company warned that if the hunt proved unsuccessful, it would shut the stores.

Analysts were not surprised at AOL Time Warner's inability to sell the shops. "This is not the best time to have real estate in the marketplace," said Thomas Filandro, a retail analyst at J.P. Morgan. "The climate has been very challenging."

The AOL Time Warner spokeswoman would not discuss attempts to sell the stores in detail but said the effort was effectively abandoned in February. The decision to close the stores was reported in Denver's Rocky Mountain News, although AOL Time Warner has kept a low profile about the issue and has released no formal statement on the job losses.

The 3,800 job cuts represent about 4% of the company's 90,000 employees. AOL Time Warner cut 2,400 jobs following the merger but said retail-related layoffs were not included in that figure.

Time Warner opened its first retail store in 1991. The number of locations peaked at about 130 worldwide.

Analysts have suggested that Hollywood studios have over-exploited their licenses since entering the retail store business.

Walt Disney Co., which sells merchandise stamped with its own characters, plans to stick with its slumping retail business but has said it would cut the number of North American locations from 494 to 400 over the next four years.

Disney also has begun remodeling stores to adapt to changing shopper demands. The new look features in-store "media" walls showing Disney programs and interactive kiosks that permit online shopping for merchandise not found on shelves.

Floor plans have been revamped to permit quick changes to feature seasonal items. Disney expects 20 stores to be altered by the fall and 100 more each year after that, said a Disney spokeswoman.

A number of high-profile Warner Bros. Studio Store locations already have closed, such as its marquee Fifth Avenue shop in New York and stores in Los Angeles and Palo Alto.

At its three-story, 40,000-square-foot Times Square store Friday, tourists picked through discounted Scooby-Doo polo shirts and Hogwarts caps under a neon sign presciently blinking "That's All Folks." Although no signage clearly indicated that the store would be gone soon, employees said they knew of the impending shutdown.

About 85 U.S. stores remain to be closed, the AOL Time Warner spokeswoman said. She added that the closings will not affect about 30 non-U.S. stores, which operate under separate franchising agreements.

AOL Time Warner said May 17 that post-merger costs have totaled about $1 billion. The cost of the store closings have been accounted for, the spokeswoman said.

AOL Time Warner shares fell $1.25 to close at $50.11 on the New York Stock Exchange.

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