Disney repurposes NYC flagship store

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Walt Disney Co., trying to make a splash in retail entertainment, will overhaul its only remaining Manhattan store, adding hands-on activities, New York-centric merchandise and live costumed characters in their first appearances outside the conglomerate's theme parks and cruise lines.

The 30,000-square-foot store on Fifth Avenue will be renamed World of Disney and will be overseen by the theme-park division. The rest of the money-losing Disney Store chain, which has been for sale for the past year, stays under the company's consumer products group.

"We're trying to make this a destination for tourists and locals," said Leslie Ferraro, VP-global marketing for Walt Disney Parks & Resorts. "It will give people a taste of the parks."

The store launches into a competitive area, with retailers as diverse as grocery store chains and Wal-Mart trying to make their environment more entertaining with book signings, celebrity appearances and kids events. In the same New York neighborhood, the American Girl Cafe, which opened last fall, caters to youngsters and their $100 Mattel dolls.

Disney already has a foot in sports-centric retail entertainment with its eight ESPN Zones. New York's World of Disney store will mirror those found at Disneyland in Southern California and Disney World in Orlando, Fla. The affinity for the Disney brand that some consumers and particularly tourists have could "add to the competitive advantage," Ms. Ferraro said.

World of Disney, expected to reopen in October, will serve as a promotional spot for the entertainment giant's other offerings. For instance, the store will hype "The Incredibles," the Disney/Pixar film launching in November, and the 50th anniversary of Disneyland next year. It will tout the theme parks year-round, with services on site for booking vacations.

The mall-based Disney Stores struggled through the late `90s, when "they were facing saturation level," said David Miller, an analyst with Sanders Morris Harris. "There were so many stores and so many that weren't profitable."

slipping sales

Consumers didn't think the merchandise was special enough to warrant the premium price, and sales slipped. Unprofitable stores closed, leaving about 335. Analysts have estimated that the stores lose $50 million a year, weighing on earnings. Rival Warner Bros. went through its own retail morass and ended up closing its entire chain of Warner Bros. Studio Stores.

It made sense to keep the Disney store on Fifth Avenue, Mr. Miller said. "There's a lot of foot traffic through here," he said. "It's wonderful advertising."

The first and second floors will feature Disney apparel, toys, candy and other goods, with special emphasis on New York-themed products. Iconic clothing that has resurfaced lately, such as the retro-look Mickey, will have dedicated areas.

The third floor will have a stage for the costumed characters, who will perform, pose for photos and greet visitors. There will be dedicated areas for playing video games, video screens for watching Disney releases, and listening stations for Disney music.

There are no makeover plans for any other Disney Stores.

Prior to the reopening, there will be an ad campaign in the New York area and in tourist-targeted media. Ms. Ferraro said the company hasn't decided yet if it will be handled in-house or by the parks' longstanding agency, Publicis Groupe's Leo Burnett USA, Chicago.

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