Disney (NYSE:DIS) may finally be ridding itself of the albatross it has in the form of the Disney Stores.
Children's Place (NASDAQ:PLCE) is in a nonbinding agreement that could lead to a deal under which it would take over the Mouse chain in the context of a long-term licensing scheme (you can read about it in this release, which discusses Children's Place's sales for July). Important note: Nothing is set in stone, so these talks may go nowhere.
I've been waiting a long time for Disney to dump its retail operations. The stores are great and all, but they've been a drag on the company's consumer division. This genre of retailing was, at one time, a successful participant in the mall business culture; eventually, people tired of the concept, and sales became tough to manage. Time Warner (NYSE:TWX) realized this and shuttered its Warner Brothers stores a few years ago.
Merchandising is, of course, an important driver for the Walt Disney Company, but there's no need for the concern to operate its own physical locations. The model of licensing intellectual property to manufacturers/distributors such as Hasbro (NYSE:HAS) is a more efficient way of generating money for the shareholders. Plus, many have argued that Disney was effectively competing with itself by selling its wares in the stores while at the same time its licensed products sat on shelves at the likes of Wal-Mart (NYSE:WMT) and Target (NYSE:TGT). Even though a lot of the merchandise at the stores may have represented exclusive offerings, it's conceivable that, to the average consumer, there was no compulsive need to visit a Disney location because the brand could be found basically anywhere.
Disney, as we all know, needs to get its stock back to its former glory days; a move like this would help it do that (King Arthur certainly didn't). In the interest of the stockholders, I say to management: Get this divestiture done.
For more information on Children's Place, see the following articles:
- No Place for Children, by Mike Cianciolo
- Children's Place a Victim of Own Success, by Rich Smith
- Shorts Roost at Children's Place, by Rich Smith
David Gardner has recommended both Time Warner and Hasbro for Motley Fool Stock Advisor subscribers. Curious about which other companies have made the cut? Sign up risk-free for six months.
Fool contributor Steven Mallas owns shares of Disney, but none of the other companies mentioned.
