Disney Spends Too Much Bringing Its Magic to the Mall

Last Updated May 25, 2010 6:30 AM EDT

Coming to a mall near you, starting in June: A magical new Disney Store with a $1 million makeover price-tag. No matter how marvelous the remodeled stores may be, Disney (DIS) is going to have to sell a heck of a lot of Cinderella costumes to make this hefty investment worthwhile.

The Disney retail chain, now at 340 stores, is certainly ripe for sprucing up after going through a rocky patch. They were a huge hit when first introduced in the late 1980s, but then Disney went crazy with expansion and opened 600 locations. Performance foundered and the company sold the chain off to The Children's Place Retail Stores (PLCE) in '04. That went so well Disney bought the chain back in '08 and closed many of the stores.

Recently, it enlisted the help of none other than Steve Jobs and the crack design team at Apple (AAPL), which has created the stores with the highest per-square-foot gross in retailing. They've created a place that's a cross between a retail store and a high-tech version of the Disney theme park. It's guaranteed to be a must-stop for any parent with a child under age eight or so, a magical realm where mirrors talk and little girls can cavort inside a golden princess castle while boys select their own movie choice to play on a big screen. Malls can dismantle their playgrounds, as this is going to basically serve as a substitute.

But we're talking about a $340 million investment over the next five years, to remake all the stores. That's a huge investment for a retail chain that makes about $400 million in annual sales. And it's basically a gut-instinct call -- there's no operating prototype or half-dozen test stores where we've seen double-digit sales growth.

Most chains would tread a bit more cautiously and want to see some initial success before they start talking about a chainwide overhaul of this magnitude. But having invested in the high-profile Apple team, Disney managers have bought into their pricey vision whole hog. They seem to be forgetting that they're not selling $400 iPods here, but $18 plush toys.

Maybe it works if you just think of the stores as a big promotional vehicle to get patrons to theme parks, though they're an expensive one at that considering all those leases. But viewed as a retail chain alone, it's hard to imagine the stores will become so wildly successful as to make that money back.

It's also possible sales could go down, with all the techno-distractions now installed in the stores. Who needs to buy when you can just come and play! They're even considering renaming the stores "Imagination Parks."

We'll soon see if parents will shell out while their tykes cavort in the stores. The Shops at Montebello in California will unveil the first remade store next month.

Photo via Flickr user Rennett Stowe

  • Carol Tice

    Carol Tice is a longtime business reporter whose work has appeared in Entrepreneur, The Seattle Times, and Nation's Restaurant News, among others. Online sites she's written for include Allbusiness.com and Yahoo!Hotjobs. She blogs about the business of writing at Make a Living Writing.