Children's Place Taking Over Disney Stores

[MickMan]

http://biz.yahoo.com/ap/041020/children_s_place_disney_1.html

http://biz.yahoo.com/rb/041020/retail_childrensplace_disney_3.html

 

[DancingBear]

The Children`s Place Retail Stores, Inc. (ticker: PLCE, exchange: NASDAQ) News Release - 20-Oct-2004


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The Children's Place and the Walt Disney Company Enter into Definitive Agreement Regarding the Sale of the Disney Store North America Retail Chain to the Children's Place


-- Acquisition Will Strengthen The Children's Place Leading
Position in the Newborn to Age 10 Category

-- Sale is Part of Disney's Ongoing Refocusing of its Consumer
Products Operations on Character Franchise Development and
Licensing

SECAUCUS, N.J. & Burbank, Calif.--(BUSINESS WIRE)--Oct. 20, 2004--The Children's Place Retail Stores, Inc. (Nasdaq: PLCE) and The Walt Disney Company (NYSE: DIS) today announced that the parties have entered into a definitive agreement for The Children's Place to acquire and operate under a long-term licensing arrangement the Disney Store retail chain in North America, which currently includes 313 stores.

"This exciting and unique opportunity gives us instant access to one of the most magical brands in the world, and is consistent with our goal of being the leading retail player in the newborn to age 10 category," said Ezra Dabah, chairman and chief executive officer of The Children's Place. "The Disney Store North America profile is strikingly similar to that of The Children's Place: the chain is a mall-based, vertically integrated specialty retailer, with a comparable customer demographic. Disney Store North America generates high sales productivity, driven by significant customer traffic. We believe that by utilizing our merchandising and sourcing expertise and leveraging our infrastructure we can further increase the level of profitability and build on the chain's positive momentum."

"The Children's Place management team has a proven track record of growing a unique and compelling retail concept," said Peter E. Murphy, senior executive vice president and chief strategic officer of The Walt Disney Company. "We believe their commitment to quality, the Disney brand, and entertainment retailing will maximize the Disney Store opportunity. We look forward to a long and rewarding relationship with The Children's Place."

"The sale of the Disney Store North America marks another step in the ongoing refocusing of Disney Consumer Products' resources and expertise toward growing our core character franchises such as Mickey and developing new and exciting character franchises such as Disney Princess and W.I.T.C.H." said Andy Mooney, chairman of Disney Consumer Products. "We will continue working with all our retail partners and licensees, including the Disney Store, to optimally showcase Disney's character franchises to consumers of all ages across all channels of distribution. The current management team's success in improving the performance of the Disney Stores over the last year should serve as a platform for The Children's Place to continue growing and improving the Disney Store business."

Mr. Dabah continued, "By combining the Disney brand with our retail expertise, we believe we can increase sales, produce significant margin expansion and leverage operating expenses - resulting in increased earnings power for our shareholders. Assuming a November closing, we anticipate that the transaction will be accretive to earnings in fiscal 2004 and on an annualized basis in fiscal 2005."

TRANSACTION OVERVIEW

The Children's Place will acquire the equity of the Disney Store North America from Disney Enterprises, Inc. in exchange for a working capital adjustment payment to Disney at the close of the transaction. The Disney Store North America will retain responsibility for the store lease obligations. The Disney Store North America will be held in a wholly owned subsidiary of The Children's Place and will have the exclusive right to operate the Disney Stores in the United States and Canada under a long-term license agreement. The Disney Store North America will continue to manufacture, source, offer, and sell merchandise featuring "Disney-branded" characters, past, present and future, and will begin to pay royalties to Disney on its physical retail store sales on the second anniversary of the closing of the transaction. Furthermore, beginning in October 2005, the Disney Store North America will operate an Internet store featuring a select assortment of merchandise offered in the physical retail locations. The Walt Disney Company will continue to operate the Disney Catalog and will maintain a Disney online retail presence.

The Children's Place has committed to invest up to $100 million into the remodeling and operations of the Disney Store North America. Of this amount, an initial $50 million will be funded at closing. The Children's Place will fund the transaction with cash on hand and short term borrowings and at this time, does not anticipate taking on any long-term debt or issuing any stock as a result of this transaction. In connection with the acquisition, The Children's Place is in the process of expanding its credit facility and establishing a working capital facility for its new subsidiary with its working capital lender, Wells Fargo Retail Finance.

The Hart-Scott-Rodino waiting period has expired, and subject to various closing conditions, the closing is expected to occur during the fourth quarter of the 2004 calendar year.

OPERATING PRIORITIES

Mario Ciampi, Senior Vice President of Store Development and Logistics for The Children's Place, will be appointed President of the Disney Store North America and will report directly to Ezra Dabah, Chairman and Chief Executive Officer.

Mr. Dabah commented, "Mario Ciampi is a proven leader and we fully expect his leadership and experience to translate into long term success for the Disney Store business. Over the past 13 years Mario has played a pivotal role in building and growing The Children's Place, including spearheading our successful expansion into new markets like Canada and Puerto Rico."

The Company's operational action plan will encompass the following key areas:

-- Enhance the store concept and in-store entertainment
experience through store remodels;

-- Strengthen the value proposition by offering quality
merchandise at affordable prices;

-- Utilize the Company's direct sourcing expertise and
infrastructure;

-- Implement a character driven merchandise strategy that will
include more frequent product flows; and

-- Leverage existing back office functions and systems
infrastructure.

"The Disney Store provides us with the ability to capitalize on the popular licensed character apparel market and gives us a new growth vehicle. We believe we can significantly grow the chain through selective expansion into quality malls, and lifestyle and outlet centers," Mr. Dabah concluded.

CONFERENCE CALL

Management of The Children's Place will host a conference call this morning at 9:00 am Eastern Time with investors to discuss the transaction. Interested parties can access the call by dialing 785-832-1508, ID # "PLCE." The call can also be accessed through the Investor Relations section at The Children's Place website www.childrensplace.com. A replay of the call will be available approximately one hour after the conclusion of the call, until midnight on Wednesday, October 27, 2004. To access the replay, please dial 402-220-0857, or you may listen to the audio archive on the Company's website, www.childrensplace.com.

ABOUT THE CHILDREN'S PLACE

The Children's Place Retail Stores, Inc. is a leading specialty retailer of high quality, value-priced apparel and accessories for children, newborn to age ten. The Company designs, contracts to manufacture and sells its products under the "The Children's Place" brand name. As of October 2, 2004, the Company operated 725 stores, including 674 stores in the United States, 49 stores in Canada, and two stores in Puerto Rico. The Company also sells its merchandise through its virtual store located at www.childrensplace.com.

 

[DancingBear]

I listened to the investor conference call. A few pieces of info:

--They will continue to sell park tickets at the stores.

--"hardline" products have been producing the best margins in the Disney stores, and they expect only perhaps a small change in the ratio toward "softlines" (clothing).

--Disney stores generate a lot of traffic; TCP will be seeking to convert more of that traffic into buyers.

--TCP sees an opportunity to seize on Disney having become the only mall toy store, with K&B, FAO Schwartz and others having problems.

--They're talking about 5 more store closings in 2005, a chance of 3-5 more after that, but generally they feel Disney has done a good job winnowing the locations.

--Initial price points will be brought down a bit, but promotions and discounts will be curtailed. Surveys show customers feel price to value is not good now, TCP hopes to improve that perception.

 

[exDS vet]

The way I heard it on the conference call, they will close five Disney Stores by the end of TCP's fiscal year, which ends January 31, 2005. That means those stores will probably be closed right after the holidays.

They are also talking about expansion in a couple of years as well as opening Disney Store outlets in the near future. They forcast the possibility of the Disney Store chain expanding to a possible total of 600 stores. Since TDS had over 700 stores at one time, I can't really see it doubling in size under TCP's ownership.

I'm glad to hear about the success of hardline sales, but I read that hardlines would be going away over time. It sounds like since TDS is one of the only toy destinations in the malls, so maybe there's hope for the hardlines staying.

 

[disrailfan]

Anyone hear whether the DVC Discount is going away at TDS? I assume it will but you never know. I know I was in TDS at Castelton Mall in Indianapolis a week ago and was still allowed my 10% discount.

Here's hoping as it has saved us alot of money.

 

[madaboutMickey]

As of today, TDS has not receiveed any info stating that the DVC discount wiil not be honored. However, the closing will not take place until mid November. No one in the stores knows what changes may be ahead for our guests. ie : will guests be able to make catalog, disney direct and park returns at the stores? What will happen to the Disney Credit Card (not the Visa card) That can be used at the stores and the parks.