Disney Stores operator files for bankruptcy

March 26, 2008 7:10:58 PM PDT
The Children's Place Retail Stores Inc. announced Wednesday that the company subsidiary that operates the Disney Store chain has filed for Chapter 11 bankruptcy protection as part of its previously announced strategy to exit the Disney Store business and focus on its core brand. The Chapter 11 filing by the subsidiary, Hoop Holdings LLC, does not apply to the parent company.

The Children's Place said last week that it planned to let Walt Disney Co. take back control of about two-thirds of the 335 stores in the Disney Store chain. About 115 remaining stores were expected to close.

Disney handed ownership of the chain to Children's Place in November 2004 with an agreement that Children's Place would pay royalties after two years.

In a written statement, Chuck Crovitz, interim chief executive officer of The Children's Place, said Wednesday that the company had concluded that "the cost of running the Disney Store was no longer an acceptable use of Company's resources" and that the filing would "enable the Company to transition away from the Disney Store business in an orderly and expeditious manner."

The Disney Stores recorded an operating loss of $92.1 million for the three months ending Feb. 2 and $107.3 million for the year.

Gary Foster, a spokesman for Disney Consumer Products, said Wednesday that the filing was "not unexpected."

"From a Disney perspective, the negotiations are still ongoing," he said.

The Children's Place, a specialty retailer of children's merchandise, currently operates more than 900 Children's Place stores.