Disney Stores in U.S., Canada Being Sold to Children's Place

From Bloomberg News

Walt Disney Co. said Wednesday that it had agreed to sell its money-losing Disney Stores in the U.S. and Canada to Children's Place Retail Stores Inc. Terms weren't disclosed.

Children's Place said it would spend as much as $100 million to remodel and run the 313 Disney locations, and might expand to as many as 600 stores. The chain will retain the Disney name under a licensing agreement.

"The opportunity to increase the number of Disney Stores is significant and will be an important new growth vehicle," said Ezra Dabah, chairman and chief executive of Secaucus, N.J.-based Children's Place, which has 723 stores of its own.

Disney's flagship Manhattan store isn't part of the sale, Children's Place said.

Disney Chief Executive Michael Eisner cut the ribbon on the first Disney Store in 1987 in Glendale. After reaching a peak of 743 outlets in 1999, the company has had to close or sell some locations because of lackluster sales and profit.

The chain, which sells toys and clothing bearing images of Mickey Mouse and other Disney characters, had 481 sites worldwide as of September 2003.

Children's Place shares rose $4.67 to $29.63 on Nasdaq. Disney shares fell 15 cents to $24.74 on the New York Stock Exchange.

The companies had said in June that they were discussing a sale.

Retail isn't one of Disney's strengths, said Victor Hawley, who helps manage $3.1 billion at Reed, Conner & Birdwell in Los Angeles, including 2.5 million Disney shares.

"Let someone who's very strong at retail run the stores," he said. "Disney should be focused on content: What's going to be the next 'Lion King,' the next thing that's going to sell a million backpacks or trinkets."

Children's Place plans to use its experience selling children's clothing to increase margins and add stores in markets including New York, Houston, San Diego, Salt Lake City and Canada.

A "working capital adjustment" payment will be made to Disney for store inventory, Children's Place spokeswoman Heather Anthony said. The company will pay royalties to Disney for 15 years, starting two years after the transaction closes, she said.

Disney said in May 2003 that it was exploring the sale of stores in North America and Europe. It sold the chain in Japan in 2001 to Oriental Land Co., which operates Tokyo Disneyland, for $51 million plus royalties.

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