Disney, Warner Bros. battle for mall dollars; retail outlets provide studios new money source.

Walt Disney Co. and Warner Bros. Inc. are aggressively expanding their retail store operations, selling everything from T-shirts to golf bags emblazoned with Bugs Bunny and Mickey Mouse, in an ever-widening battle for mall shoppers' dollars.

Although the retail business overall is suffering, The Disney Store and Warner Bros. Studio Store are two of the fastest-growing chains in the nation, say retail industry observers.

Disney, which started its mall retailing operation in 1987, now has 166 stores. Last week Disney opened its first stores in Japan and Canada.

Chain-wide sales this year will exceed $100 million, according to industry analyst estimates, although Disney executives closely guard the numbers. There are 10 Disney stores in the Los Angeles area alone, with the Glendale Galleria outlet considered the chain's flagship.

Warner, which started its operation in 1991, is rapidly catching up, with a five-year plan to have 100 stores, according to Peter Starrett, president of Warner's Worldwide Retail division.

The next Warner store opens Oct. 16 at Santa Monica Place and by the end of the year there will be 21 across the country. There are eight stores currently.

Warner's stores are twice as large as Disney's, averaging 7,000 square feet. At Caesars Palace's Forum Shopping Center in Las Vegas, Warner has been a winner since opening in May and could top $10 million in sales its first full year. Beverly Center is the local Southland flagship with volume expected to reach $6 million this year, according to figures cited by the apparel trade newspaper Women's Wear Daily.

The old merchandising cliche "retailing is theater," could partially explain Disney's and Warner's success.

In Las Vegas, the Warner store is hard to miss, with a 13-foot-tall Tasmanian devil above the entrance pulling a chariot driven by Bugs Bunny in Roman armor.

Inside Beverly Center's Warner store, movie-conscious shoppers are attracted by a display featuring the slinky Catwoman suit Michelle Pfieffer wore in "Batman Returns." The display includes the flying warrior penguin props used in the film.

Retailing is becoming a necessary cash contributor for studios which have long sought to diversify, said Dennis Frost, entertainment analyst with Sutro & Co. Inc. "Retailing offers the studios a chance at a good margin business and another way to offset the very volatile box office," he said. "Disney has been a success and obviously Warner wanted a piece."

Warner wanted a bigger piece of the merchandise business after its Batman licensed merchandise rang up $1 billion in retail sales in 1989-90, Starrett said. For Batman, Warner only received royalties, but now with its own store, the studio reaps the full merchandising benefit of its successful movies.

Disney and Warner executives don't consider themselves to be in competition, they maintain. The Disney business is geared more toward children and gift giving, with most of the merchandise themed around Disney's large inventory of cartoon and animated characters. At the Warner store, 80 percent of the merchandise is designed for adults, with stores such as The Gap posing competition for Warner's casual attire.

Price tags are in the moderate range for apparel but go as high as $18,000 for movable art pieces of Looney Tune characters.

Disney and Warner go up against each other in several shopping malls. At the Scottsdale Fashion Square, in Scottsdale, Ariz., the two stores are flourishing and drawing different audiences according to mall manager John James. "When Warner opened, Disney got upset, but after seeing the merchandise they wanted the other store next to them. The two stores are compatible, with 90 percent of Disney's business being children and 90 percent of Warner's being adults," James said.

The Warner store opened Aug. 1 and, despite 112-degree heat, 5,000 turned out for opening day when the Batmobile was on display.

The distinctiveness of the stores, and the crowds they draw, combined with the recession enable studios to get prime locations in the best malls. In good times busy malls have few prime leases to offer.

The major roadblock, especially for Warner, is producing enough merchandise, retailers say. "The only real problem that Warner faces right now is they can't make the merchandise fast enough. They never anticipated this demand but hopefully will pile in the desired merchandise this Christmas," James said.