Walt Disney Co. Friday confirmed it was in discussions with Children’s Place to regain control of between 200 and 230 Disney Stores after the Secaucus, N.J.-based retailer told shareholders it would take a charge of between $50 million and $100 million to walk away from the outlets.
Greg Foster, a spokesman for Disney's Consumer Products group, said an official announcement should be coming in “no more than a few week” but declined to provide financial details of the proposed deal.
In 2004, Children’s Place and Disney worked out a deal in which the retailer received equity in the then 313 North American Disney Stores in exchange for investing $100 million to remodel some stores, picking up the lease obligations on the stores and agreeing to pay Disney royalties on sales two years after the pact was approved.
However, the Disney Stores never developed into the cash cows Children’s Place or Disney had hoped.
Children’s Place Thursday reported a fourth-quarter loss of $58.5 million, a dramatic about-face from the year-ago quarter when it earned $44.7 million. The company said its Disney Stores posted an operating loss of $92.1 million in the quarter and $107.3 million for the year.
Along with its disappointing earnings report, Children’s Place announced it expects to “exit” its Disney Store North America business and anticipates it will absorb a charge of between $50 million and $100 million in the process.
Foster said Disney would be interested in reacquiring about two-thirds of the 350-plus Disney Stores in North America to augment the roughly 120 Disney Stores it still owns and operates in Europe.
“That’s one of the reasons we’re interested,” he said. “Our European stores have been very successful not only financially but also in launching new franchises on a retail level.”
Foster said the success of Disney programs and artists such as Hannah Montana, the shining star of the Disney Channel, The Jonas Brothers and Handy Mandy has created an enormous marketing and retail opportunity for the company.
“Having control over what we merchandise when we own the stores will help when a new fledgling show or movie comes along,” Foster said. “Then other bigger retailers will take notice and jump on board.”
Children’s Place shares rallied up $2.65 a share, or 14%, to close at $22.25 Friday while Disney shares moved up 66 cents, or 2%, to $31.90.
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