Children’s Place in Talks With Disney
A possible buyer has emerged for Walt Disney Co.’s specialty stores in North America a year after the Burbank media company put its money-losing retail chain up for sale.
Children’s Place Retail Stores Inc. of Secaucus, N.J., said Thursday that it was in talks to buy 323 Disney Stores in the United States and Canada. Children’s Place operates 711 specialty clothing and accessories stores for children, newborn to 10.
The companies are in advanced talks and could consummate a deal over the next several weeks, though they haven’t yet signed a letter of intent, according to a source close to the negotiations.
Under the deal being discussed, Children’s Place would own the stores and Disney would receive licensing fees based on a percentage of sales.
That would be similar to the arrangement Disney has with Oriental Land Co., the operator of Tokyo Disneyland that bought the Disney Store chain in Japan in 2001.
Disney spokesman Gary Foster confirmed the talks but declined to comment on them.
Analysts have estimated that Disney could pocket as much as $500 million for the North American chain. Efforts to sell the 105 stores in Europe recently stalled after talks with two bidders ended.
Disney said last May that it wanted to sell the chain and subsequently hired Bear Stearns Cos. and Goldman Sachs Group Inc. to help find buyers. Until recently, “they were having a tough time coming up with somebody to buy them,” said Tom Wolzien, an analyst with Sanford C. Bernstein & Co.
The company will keep its Fifth Avenue store in midtown Manhattan and its stores at the Disney theme parks and on its studio lot in Burbank. And though it wants to pull out of the specialty retail business, Disney has had some success in forging closer ties with big retailers such as Target Corp. and Wal-Mart Stores Inc., allowing them to sell their own exclusive Disney merchandise.
Founded in 1987, the Disney Stores have been among the most visible symbols of the company, selling toys and clothing featuring the image of Mickey Mouse, Winnie the Pooh and other Disney film characters.
Over the last several years the stores have struggled from overexpansion, a failure to respond quickly to changing trends and a falloff in demand for merchandise featuring its animated movie characters.
To stem losses, Disney has shuttered or sold about 300 company stores since 1999, when the chain had 743 outlets worldwide.
Selling the remaining stores would allow Disney to divert its resources to more profitable ventures.
“It’s been a bad return on capital,” Wolzien said.
Children’s Place would face a daunting challenge in turning the stores around, given the intense competition from mass retailers and the size of the operation, retail analysts said.
“They just got way too big for their own good. There are still way too many” Disney Stores, said Marty Brochstein, executive editor of the Licensing Letter, a New York-based industry newsletter. “The best merchant in the world could operate them and there would still be an issue.”
The potential transaction would bring together “Children’s Place’s retail expertise with the unique ‘Disney’ brand and creative engine,” the retailer said in a statement.
Children’s Place spokeswoman Heather Anthony said the potential deal with Disney would make the company one of the leading retailers in the newborn-to-age-10 category, but she declined to comment further.
For the four-week period ended May 29, Children’s Place posted total sales of $57.2 million, up 18%. Total sales for the 17-week period ended on the same date rose 23% to $283 million, and comparable-store sales rose 14%.
