100 TDS closing, rest to be sold

[maleficent1959]

There is an article in the Orlando Sentinel today that Disney has made the decision to close 100 stores and will sell the rest. Andy Mooney will replace Peter Whitford while they try to shop the stores around. No potential buyers were mentioned.

Here's a similar article from CBS Marketwatch.

Disney: Who wants to be a retailer?
By Russ Britt, CBS.MarketWatch.com
Last Update: 6:01 PM ET May 22, 2003


BURBANK, Calif. (CBS.MW) -- Walt Disney Co. said Thursday that it plans to put its troubled chain of retail stores up for sale, as the entertainment giant looks to license its valuable brand name rather than remain a shopkeeper.


Disney (DIS: news, chart, profile) will seek a buyer for its 548 Disney Stores worldwide, the company announced after the closing bell. The announcement had been expected since last week, after Chief Financial Officer Thomas Staggs reportedly told an analyst that a sale was possible.

On Thursday, Disney solidified that stance, saying its goal is to sell the operations outright. Peter Whitford, president of the Disney Store chain, has resigned and will be replaced temporarily by Andy Mooney, chairman of the company's consumer products division.

In a conference call with reporters, Mooney said it has proven too difficult for the Disney Stores to compete for company capital with a number of diverse entities such as movie studios, theme parks and the ABC Television Network. Retail outlets are not a "core competency" for Disney, Mooney said.

He added that Disney would consider closing the stores if it could not find a buyer.

"That would be one of the options," Mooney said. "We have absolutely not made the decision to close the stores."

Mooney said there is no time frame for finding a buyer, adding the company feels confident it can find interested parties.

Weak performance at Disney Stores has dragged down the company's consumer products division.

Mooney said the stores stopped being profitable after Disney initiated a plan to boost the store count in North America from 300 to 800 stores. Disney has reduced that store count in recent years, and the North America number now stands at 387.

More stores will be closed as Disney plans to at least reduce the number of stores 300 again, and perhaps lower if necessary to prepare the division for sale.

The group's sales have dropped 35.5 percent since1997, from $3.8 billion to $2.4 billion in 2002. Operating income has plunged even more in that time, $893 million to $394 million, a drop of 55.9 percent.

Operating income would get a boost if the outlets were sold, although revenue also would drop, Mooney added. But the company's consumer products division would not be folded back into another part of Disney should the stores be sold, Mooney said, because its sales still are a small part of the business.

In 2001, Disney sold its stores in Japan to the Oriental Land Co., which owns and operates Tokyo Disneyland and Tokyo DisneySea under a license agreement.

Mooney said the company believes a specialty retailer would be an ideal purchaser, or a financial buyer that would create its own retail operation.

Ahead of the announcement, shares of Disney, a component of the Dow Jones Industrial Average, rose 24 cents, or 1.3 percent, to close at $18.12.

Russ Britt is the Los Angeles Bureau Chief for CBS.MarketWatch.com.

 

[Luv2Roam]

Disney Stores Could Fetch $495 Million
Penelope Patsuris, 05.23.03, 1:32 PM ET

NEW YORK - Disney's sale of its retail stores in the U.S. and Europe could fetch as much as $495 million--and pay down a nice chunk of its $13 billion debt to help keep its current BBB+ credit rating from slipping further.

Prudential Securities analyst Katherine Styponias bases that valuation on her observation that troubled retail chains are generally valued at between 0.4 and 0.5 times sales, which in Disney's (nyse: DIS - news - people ) case are roughly $1 billion.

Disney officially revealed its plans to sell the ailing chain last night after the market close, but it has been shuttering its stores for some time. Since the late 1990s, the number of Disney store locations worldwide has been reduced to 548 from 740, according to a spokesman. Since late 2001, U.S. store locations have shrunk to 387 from 522.

The chain has been struggling for some time, operating at a slight loss. "This is a way to get rid of a distraction and an irritant," says Sanford Bernstein analyst Tom Wolzien. "They've put a lot effort into this, and it's just not worked."

Styponias estimates that the Disney stores will contribute 42% of the sales at its consumer products division for the 2003 fiscal year, and 3.6% of total revenue. For the quarter ending March 31, the company said the division's sales shrank 14%, to $500 million from $580 million, while operating income plummeted 38% to $53 million from $86 million. Aside from the Disney stores, consumer products also includes licensing revenue from merchandise sold outside those stores and well as the proceeds from sales of products like games.

But a sale of the properties isn't the only option, and it may not even be the best option for the mouse house. Disney has indicated that it would be interested in replicating the licensing agreement it has in Japan with Oriental Land. That company runs Tokyo Disneyland and Tokyo DisneySea Park, as well as 46 stores throughout that country, and pays Disney an undisclosed annual royalty on those sales.

While the store chain hasn't panned out, a Disney spokesman says the company is shifting its retail focus to working directly with stores like Wal-Mart (nyse: WMT - news - people ), Target (nyse: TGT - news - people ) and Toys 'R' Us (nyse: TOY - news - people ). Together they are designing product lines aimed exclusively at each chain's clientele.

Assuming Disney can find any takers in a tough market--AOL Time Warner's (nyse: AOL - news - people ) Warner Bros. unit closed its store chain in 2001 after failing to find a buyer--a Disney Store sale would provide much needed cash. That cash could be especially critical now as the U.S. Federal Communications Commission considers whether to loosen media ownership rules that would permit media giants to buy more media properties.

"With their current debt, they don't have a lot of flexibility to buy anything right now if they wanted to," says Wolzien. On the other hand, he adds, "even if they have to practically give the stores away, they might be better off if they could do a licensing deal and get a recurring revenue stream." Styponias says such an arrangement would provide a "high-margin, low-capital-intensive revenue stream."

Disney hasn't said publicly how much it aims to pare from its debt, but it is clearly making a concerted effort to do so. On May, 15 Disney closed the sale of its World Series-winning Anaheim Angels baseball team to billboard magnate Arturo Moreno for $184 million. Disney is also endeavoring to unload the Mighty Ducks, ironically, as they head for the Stanley Cup.

More From Forbes
Hollywood Vs. Copycats, Round 2 05.15.03
A decision looms in a case pitting the film studios against a firm that makes DVD-copying software.

Disney Deal Will Be No Pushover For Pixar 05.12.03
Wall Street thinks Steve Jobs will get what he wants. But in the end, he'll settle for less.

 

[Planogirl]

Assuming Disney can find any takers in a tough market--AOL Time Warner's (nyse: AOL - news - people ) Warner Bros. unit closed its store chain in 2001 after failing to find a buyer--a Disney Store sale would provide much needed cash. That cash could be especially critical now as the U.S. Federal Communications Commission considers whether to loosen media ownership rules that would permit media giants to buy more media properties.

Interesting paragraph and a particularly troubling one. Who in the world would make a pitch for these stores during these time? And why would Disney consider purchasing more media properties when so much needs to be done in the parks?

It's all very sad.