Disney Puts Its Stores Up for Sale
Walt Disney Co. is getting off the retailing roller coaster it has been riding for more than 15 years, putting its chain of signature stores on the block after a series of missteps and sharp turns in the economy.
Executives of the Burbank-based entertainment giant said Thursday that the company planned to close more than 100 of its Disney Store outlets during the next six months and sell the remaining stores to one or more buyers that would operate them under a licensing agreement.
To prepare the way for a possible sale, the company announced a management shake-up: Disney Store Inc. President Peter Whitford, who resigned Thursday, will be replaced temporarily by Andy Mooney, chief of Disney’s consumer products unit.
The announcements came after several years of attempts to revamp the stores, which have been a drain on Disney since the late 1990s.
Founded in 1987, the Disney Stores have been among the most visible symbols of the company but, according to analysts, have struggled from overexpansion, a failure to respond quickly to changing trends and a falloff in demand for merchandise featuring its animated movie characters. The weak performance was underscored when Disney recently reported that operating income in its consumer products unit plunged 38% to $53 million in its fiscal second quarter.
The decision also comes at a time when Disney is under pressure to sell assets to shore up its bottom line, which also has been hard hit by a downturn at its theme parks. Disney recently sold its Anaheim Angels baseball team to Phoenix businessman Arte Moreno for $180 million.
Industry analysts weren’t surprised that Disney decided to retreat from retail. They noted that two years ago, AOL Time Warner Inc. pulled out of its Warner Bros. stores and that specialty retailers have had a tough time weathering the current market conditions.
When Disney Stores “started getting into every mall in the U.S., they became much less special,” said Marty Brochstein, executive editor of the Licensing Letter, a New York-based industry newsletter. “They became overly expensive marketing tools.”
In an interview, Mooney acknowledged the problems of overexpansion and difficult economic times.
“It’s a challenging environment in specialty retail, no doubt about it,” said Mooney, a former Nike Inc. executive.
Mooney said it makes more economic sense for Disney to let someone with expertise in the retail industry run the stores so that the entertainment firm can allocate precious resources elsewhere in the company and concentrate on its more successful licensing business.
Disney has been working in recent years to forge closer ties with big retailers such as Toys R Us Inc., Target Corp. and Wal-mart Stores Inc., allowing them to sell their own exclusive merchandise.
“Having someone who is singularly focused on retail, and for us to move onto brand management and a licensing model, is the best approach in the long run,” Mooney said.
Disney began dismantling its retail empire in 2001, selling its Disney Stores in Japan to Oriental Land Co., which pays Disney a royalty fee based on a percentage of store sales. Oriental also operates Tokyo Disneyland.
The success of that deal prompted Disney to explore a similar arrangement in Europe and North America, Mooney said, adding that Disney does not have buyers lined up.
Disney’s retail chain has been steadily shrinking. It has gone from 700 stores in the late 1990s to 548 stores worldwide today, including 387 in North America. Store closings will continue as lease agreements expire.
The plan is to reduce over the next six months the number of stores in North America to less than 300 -- a level Disney believes will make the chain more attractive to potential buyers, including private equity firms.
“I don’t think they’re going to have any trouble finding buyers,” said Richard Giss, a partner in the retail services group of Deloitte & Touche in Los Angeles. “They’ve got premium locations, and the Disney name is a good place to start out for any enterprise.”
