View Full Version : Children's Place to Buy Disney Stores - Reuters, 10/20/04

10-20-2004, 08:20 AM

QuikQuote: Children's Place Retail Stores Inc. said on Wednesday it will buy 313 retail stores from Walt Disney Co., and its stock rose more than 14 percent in early morning trade.
The company did not disclose the price it will pay for Disney's North American chain, but pledged to invest $100 million in upgrading and expanding them. The stores will sell Disney brand merchandise under a royalty agreement.

10-20-2004, 08:23 AM
The Children's Place and Walt Disney Company Press Release

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

SECAUCUS, N.J. & Burbank, Calif.--Oct. 20, 2004--
-- 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

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."


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.


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.


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 (http://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 (http://www.childrensplace.com/).


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 (http://www.childrensplace.com/).

This press release and above referenced call may contain certain forward-looking statements regarding future circumstances. These forward-looking statements are based upon current expectations and assumptions and are subject to various risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements including, in particular, the risks and uncertainties described in the filings of The Children's Place and The Walt Disney Company with the Securities and Exchange Commission. Actual results, events, and performance may differ. Readers and listeners on the call are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to release publicly any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. The inclusion of any statement in this release does not constitute an admission by The Children's Place or The Walt Disney Company or any other person that the events or circumstances described in such statement are material.

10-20-2004, 08:24 AM
Note: The online "DisneyStore.com" has been renamed "DisneyDirect.com" and will remain part of the Walt Disney Company operations.

10-20-2004, 10:02 AM
Maybe they will bring back the Disney Stores to Utah. One day they were here and the next they were gone. I loved shopping in the stores. :crying:

10-20-2004, 10:26 AM
Maybe it will have a relationship similar to Oriental Land Company's: DIS tells them how to run things and creates an extremely high standard to maintain, and then sits back and collects royalties.
Couldn't do that when they owned the stores themselves. Sheesh.

10-20-2004, 11:41 AM
Maybe it will have a relationship similar to Oriental Land Company's: DIS tells them how to run things and creates an extremely high standard to maintain, and then sits back and collects royalties.We can only hope


10-21-2004, 01:04 PM
After reading this article in Amusement Business today...


Children's Place is paying virtually no cash for the stores upfront in exchange for taking over the operation under a 15-year licensing arrangement with three 10-year options to renew with Disney.

Now we have known about the possible deal was in the works starting in June, and employees were notified in September of the "sale" to Children's Place.

Could have Disney dragged its feet on the deal to push the transaction into the 2005 fiscal year, to make the "books" look better for Mikey this fall in his attempt to stay in charge as long as possible???

10-22-2004, 03:42 PM
Disney really used to have a wonderful concept in these stores, back when they first started.

If Disney could have operated the store chain consistently with how the theme park stores were operated, kept some high-end merchandise, been more synergistic with the whole company, kept consistency in executive management and not diluted their own concepts by also selling floods of merchandise at Wal-Mart and Target, then I believe the Disney Store chain could have remained popular and profitable.

Disney shot itself in the foot. I don't need or want all those lithographs when I buy a home video, but I do appreciate that Wal-Mart sold Disney videos cheaper than Disney Stores did, closer to home than Disney Stores, too.

Disney figured their "brand" alone could carry their stores, but they discovered instead that consumers want price and shopping convenience, too, in addition to the pixie dust. So you can buy Disney videos, sing and read a longs, even the Princess costumes and licensed toys at Wal-Mart... Why fight the traffic to do the same at a Disney Store and pay more when you get there?

But still... The Disney Stores seemed that special corner of Disney magic right there in my home town, or home suburbia. Step inside from the mall and you were transported. That great video wall! The ability to buy park tickets there! When they featured adult merchandise and collectibles that really were special! In our area (New Orleans) sometimes the characters would come from Orlando for meet and greets in the mall, hundreds and thousands of families would come!

Bye-bye, Disney Stores as I used to know you. Rest in peace.

10-22-2004, 04:03 PM
That could all be brought back, under an extremely strict contract. And for "free," DIS should turn the screws to make them more of a magical experience. (That's what my first post above was referring to.)

10-23-2004, 02:40 PM
I think the relationship between Children's Place and Disney won't be unlike the relationship between Disney Consumer Products and any other retailer selling Disney-logoed items: "Here's our stuff, please sell our stuff, thank you." Maybe a little jazzier than the relationship between, say, Disney and Wal-Mart. But we'll have to see how the real relationship evolves over the course of the contract to see how Disneyfied and Pixie Dusty Children's Place doing business as Disney Stores maintains from this point.

10-25-2004, 09:38 AM
Could have Disney dragged its feet on the deal to push the transaction into the 2005 fiscal year, to make the "books" look better for Mikey this fall in his attempt to stay in charge as long as possible???

There always has to be a "how does this make Mike look bad" comment, doesn't there? Geesh!

11-02-2004, 05:27 PM
I agree with most everything CarolKoster had to say. The Disney Stores were originally little slices of magic, but over time Disney mismanaged them. This sale to The Children's Place is a great opportunity to regain that lost magic, but also a risk. How many people in the general public know about this change? If The Children's Place does a poor job, it's the DISNEY brand that will suffer, and that brand perception is perhaps the most valuable thing Disney has. I hope that the details of the sale included very strict regulation of how the stores will be run to ensure only the highest standards consistent with the Disney name will be enforced.