Disney Looking to Buy Back Stores

Mar 25, 2008 1:54 AM  By

Maybe running its own retail stores isn’t such a Mickey Mouse idea for the Walt Disney Co. after all.

Disney said March 20 it’s in advanced discussions with The Children’s Place Retail Stores about buying back about two-thirds of the Disney Store chain in North America, The company sold to stores to The Children’s Place in October 2004.

Children’s Place subsidiaries Hoop Holdings and Hoop Holding Canada now run the stores under a license from Disney. The Children’s Place, which recognized a pretax asset impairment charge of $80.3 million in the fourth quarter of fiscal 2007, said in a release it wants to exit the Disney Store business after a thorough review of the operation, its potential for earnings growth, its capital needs, and its ability to fund the needs.

Considering Disney sold off the stores unit because it was not a profitable business segment, does it make sense to buy it back? Stuart Rose, managing director for Wellesley, MA-based investment firm Tully & Holland, is a bit skeptical.

The store merchants “need to be designers, buyers, and operators,” he notes. Disney has a good reputation in all three areas, just not necessarily expertise in putting them together in a retail economic model Rose adds.

It might make more sense for Disney to find another retail partner. “I think that was a good idea to exit when they did and employ someone who is a retailer,” Rose says of Disney’s 2004 decision to divest the retail arm. “It just didn’t work out for Children’s Place.”