Blog: Disney to weave magic over chain?
Leonie Barrie | 25 March 2008
News that The Walt Disney Co is seeking to regain control of about two-thirds of the stores in the Disney Store chain comes as no surprise.
The Children's Place Retail Stores Inc has had a long-term license agreement to operate the Disney Store shops in North America, but in January hinted all was not well and that it was to review its strategic options.
Contributing to its decision were a recent dispute with The Walt Disney Co, the resignation of CEO Ezra Dabah for violating the company's code of conduct on securities trades, and long delays to its quarterly reports filings.
As if these problems weren’t enough, Children's Place has just swung to a fourth quarter loss of $58.5m, or $2.01 per share, which it blamed on impairment charges and other costs related to the Disney deal. In the same period last year it posted a profit of $44.7m, or $1.48 per share. It has also embarked on a cost-cutting exercise for the year ahead, which will see the loss of about 130 jobs.
It remains to be seen whether the Disney Stores will be a burden for the entertainment giant; after all, it has already offloaded them once before. The company seems to think, though, that the retail stores could extend its brand and, with a smaller footprint, add value to the company.
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