DISCUSSION TOPIC: Disney Gets Back into Retail
Walt Disney Co. said last week it wants to return to running its Disney stores in North America. Re-owning the stores “can be an important extension of the ‘Disney’ brand” and would serve as a launching pad for the company’s growing number of creative franchises, according to Disney.
On the other side of the bargaining table, The Children’s Place, which licensed the Disney Store chain for the U.S. and Canada in November 2004, appears to have no problem handing it back. Disney Stores recorded a $107.3 million operating loss in 2007.
Since the sale, Disney has grown dissatisfied with the sluggish pace of store remodeling under Children’s Place. But Disney itself had long struggled with its North American stores in the past.
As with Warner Bros., critics said Disney had opened too many mall stores and failed to change them often enough to preserve novelty.
But Disney asserted last week that it can run its North American stores profitably as a smaller operation just as it does in Europe, where it owns 120 Disney Stores. That “right size” is from 200-225 stores. Children’s Place runs 335 Disney Stores and intends to close the stores Disney doesn’t want prior to selling back the franchise.
Discussion questions: Do you think it’s a good idea for Walt Disney to take back its North American retail business? What do you think of their plans to reduce the size of the chain and exploit its newer franchise properties? What steps should be taken to bring Disney Stores back to profitability?
When Disney sold their retail stores to Children’s Place in 2004, they were trying to unload its stores as part of a larger effort to dispose of noncore assets such as sports teams. The once-profitable retail chain hit a high of 700 stores in 2000. Since then, Disney had been trimming the number of stores, while losing money on the operation. Children’s Place saw the acquisition as strengthening their leadership in the newborn to age 10 category, while Disney believed Children’s Place’s commitment to quality, the Disney brand, and entertainment retailing would maximize the Disney Store opportunity. They were trying to sell the European stores as well, although that never occurred.
Fast forward almost four years and the times have changed. Children’s Place was never able to find the profitability key for the franchise and product design & innovation was lacking. They did not close enough poor performing units and actually increased the number of stores.
Disney recognizes now that owning a smaller number of well-run stores in good locations can be reasonably profitable and serve as a wholly-controlled brand-building platform. The keys though are “well-run stores” and “good locations”. If this can be accomplished through hiring a number of excellent retailers and taking advantage of the current economic situation to renegotiate leases in the best locations and close the unwanted stores, this move could be quite positive.
Mike Osorio, your Dare to be Contagious! TM strategist
GO TO THE FULL DISCUSSION AT RETAILWIRE.COM:
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