Disney Stores to Get Redesign

In the latest effort to revive its struggling retail store chain, Walt Disney Co. said Friday that it will turn it into two groups of specialty stores.

The renamed Disney Play stores will target 3- to 10-year-olds and stock toys, costumes based on Disney characters and plush Mickey Mouse and Winnie the Pooh dolls.

The other outlets will be called Disney Kids at Home, which will be aimed at parents seeking bed and bath products, apparel and home furnishings for their kids.

Disney said the overhaul will cost $200 million over the next three years. It plans to continue closing under-performing stores.

But the design change isn’t likely to produce a quick upturn in sales, analysts said.

“Just getting people into the store is something they’re having difficulty with,” said Katherine Styponias, an analyst with Prudential Securities, noting that the recession has slowed sales in Disney’s merchandise business. “They’re competing with a lot more [non-Disney characters], and their core audience is a lot smaller than it used to be.”

However, Disney said its unprofitable store chain will show a profit this year.

Disney began testing prototypes of the new stores in Canoga Park and Torrance late last year.

“As a specialty retailer, we need to focus on our core customers,” said Peter Whitford, president of Disney Stores Worldwide. “Unless you’re the size of a department store, it’s hard to be all things to all people.”

The overhaul comes as Disney is scaling back its retail chain, from a high of more than 500 stores in the U.S. to about 350 by 2005. The remaining U.S. stores will be remodeled according to one of the two specialty groups, though some locations might be a mix of both. The 189 overseas stores will remain Disney Stores, which sell everything from lunch boxes to movies and toys.

Disney launched the store chain in 1987 and it was an important money maker for the company in the 1990s, when hit animated movies such as “Beauty and the Beast” and “Aladdin” created a huge demand for figurines, pajamas, clocks and toys based on popular characters.

But Disney built too many stores, saturated the market with its library of characters and failed to keep the merchandise fresh with changing trends, analysts say.

Other entertainment companies also struggled in the retail arena, and Warner Bros. pulled out of the retail business last year.

Disney’s retail stores accounted for only 4% of Disney’s consumer products division’s $834 million in sales in the latest quarter.

Most of the unit’s sales are from licensing Disney characters for merchandise.

Disney’s previous store redesign came 18 months ago, when the company said it would overhaul 350 of its Disney Stores and close 100 worldwide.

Those new stores, which began with prototypes in Costa Mesa and Cherry Hill, N.J., were more spacious and had a high-tech look, equipped with computers customers could use to buy theme park tickets.

About 20 stores had been redesigned when Disney in April tapped veteran retail executive Whitford, formerly chief executive of Structure, the men’s sportswear division of Limited Inc., to head the retail operation.

“I think the analysts were correct. [In the past] the merchandise was stale,” Whitford said. “We need to work with a lot more speed to ensure that we are meeting the needs of our guests.”