DISNEY REACHES DEAL FOR BELEAGUERED RETAIL CHAIN.

Byline: Candice Choi Staff Writer

BURBANK - The Children's Place Retail Stores Inc. announced Wednesday it will buy The Walt Disney Co.'s flagging retail chain in an effort to become a bigger player in the infant to preteen market.

No sales price was reached. Instead, The Children's Place will provide a ``working capital adjustment payment,'' which is based on the value of the inventory in the Disney Stores at the time the deal closes sometime next month.

The Children's Place, based in New Jersey, will invest up to $100 million into remodeling and overhauling operations at the 313 Disney Stores - which will retain their name - in the United States and Canada. Plans include expansion of in-store entertainment and repricing of merchandise.

``It's been a long time coming,'' said Paul Kim, senior analyst with Tradition Asiel Securities, a New York brokerage. ``Disney was looking to unload the stores and The Children's Place was the only buyer.''

The acquisition is expected to add 30 cents to the Children's Place shares in fiscal 2005, said Seth Usdain, finance director for the Children's Place in a conference call.

Disney has been shopping its retail chain around for more than a year. Since the late 1990s, Disney has trimmed the number of locations in the United States and Canada from 522 to 313. Just last year, the chain shed 64 locations.

Disney Stores enjoyed booming sales when the stores first opened in 1987, but analysts said oversaturation led to the chain's lackluster performance.

Under the new management, Kim said the Disney Stores will likely emphasize Disney movies a lot less. ``They'll act less as an advertising conduit,'' he said. ``That was the problem before: They didn't have the flexibility to react to the marketplace.''

The Children's Place currently operates 700 locations in North America. The Disney Store's profile is strikingly similar to that of The Children's Place, said Ezra Dabah, chairman and CEO of The Children's Place. Both are mall-based chains and specialty retailers with a comparable customer base. The acquisition positions The Children's Place to become a leading retailer in the newborn to age 10 category, he said.

Mario Ciampi, senior vice president of store development and logistics for The Children's Place, will serve as president of The Disney Store North America.

The Disney Store North America will begin to pay royalties to Disney on its physical retail store sales on the second anniversary of the closing of the transaction. Disney will continue working with its retail partners and licensees to showcase its character franchises, according to a company statement.

Candice Choi, [phone]

candice.choi(at)dailynews.com