Group: Disney EchoEar Grand Mouseter/AdministratEAR
Joined: Aug. 2001
||Posted: Oct. 22, 2003 8:33 am/pm
Disney Stores auction will push into next year
Disney will have to wait until next year to see if it can sell its retail stores as industry analysts and bankers expressed doubts about whether it will find a buyer for the ailing chain.
Disney first said in May it was exploring options for its mall-based stores, which sell items that feature its world-renowned characters, including Winnie the Pooh T-shirts, Lion King DVDs and Mickey Mouse stuffed animals.
Five months later, there are still no clear signs of a buyer emerging. Gary Foster, a spokesman for Disney's consumer products division, said the company has seen some interest, but it expects the process to last into next year.
The drawn-out sale invited comparisons to AOL Time Warner (TWX) -- as it was known until recently -- which quietly closed its Warner Bros. Studio Stores two years ago after it could not find a buyer for them. Foster said Disney may have to go the same route, or it could keep the stores on a smaller scale.
The Disney brand is generally considered better recognized and more highly valued than that of Warner Bros., but similar problems plague the North American stores and could deter prospective buyers, analysts said. Disney's stores in Europe are profitable.
Both media companies sold hundreds of licenses for their famed characters, flooding the market with merchandise. Wal-Mart Stores Inc. (WMT) , for example, is Disney's biggest customer and sells some of the same goods cheaper than Disney does at its own stores.
"The stuff is in every store, every discount store and every mass merchant retailer, so it becomes questionable whether a specialty store selling the same merchandise has any real value," said George Whalin, president of Retail Management Consultants in San Marcos, California.
One person close to the process, who asked not to be named, said about 15 to 20 suitors expressed preliminary interest for either the European or U.S. chain, or both, and Disney sent them confidential packages of information about the stores.
Foster declined to discuss specifics, but he said the company cautioned earlier that it could take as long as a year for the auction to run its course.
U.S. retailers tend to avoid making big moves at the end of the year because the November-December shopping season can account for up to 40 percent of annual sales.
Mike Gallant, an analyst at CIBC World Markets, estimated that the chain lost about $50 million on $1.05 billion of sales last year. Disney reports financials for its consumer products unit but does not break out information about the stores.
Disney said in May when it announced its mid-year earnings that the stores have been a drag on the consumer products division because of the soft retail market.
"My contention is that they are going to have to close a great number of these stores or close the thing altogether," said Whalin, the retail consultant. The sentiment was echoed by bankers and analysts who follow the media and retail sectors. (Additional reporting by Peter Henderson in Los Angeles and Emily Kaiser in Chicago)