Secaucus, New Jersey, and Burbank, California – October 20, 2004 – 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.”
TRANSACTION OVERVIEW
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.
OPERATING PRIORITIES
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.
CONFERENCE CALL
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. 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.ABOUT THE CHILDREN’S PLACE
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.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.