In launching its new store prototype as described in this month’s
Senior editor Katherine Field talked with Eileen Mitchell, executive VP of RCS Real Estate Advisors, and with Paul Gainer, VP and general manager for Disney Store, North America, about its real estate tactics now and going forward.
Describe the Disney real estate strategy, in a nutshell, both from a site-selection criteria and expansion pace standpoint.
Disney Store has taken a proactive approach, focusing on a clear strategy of quality over quantity, and launching a new interactive design concept. Our vision is to keep the chain smaller in total number of stores with a focus on the best malls that support the high store productivity. This proactive approach has allowed us to secure a lot of premium locations within the “A” centers throughout the country, which is a focus going forward. Our strategy includes both urban street locations, as well as “A” regional malls and outlet centers throughout the United States and Canada. In 2010 we will open multiple locations in the U.S. and globally, and it will definitely be an exciting time for Disney Stores Worldwide.
How has the real estate strategy changed over the last months? Has portfolio optimization become a core tactic?
As we prepare to launch the newly designed Disney Stores across the U.S. and Europe, we continue to consider opportunities to maximize the distribution of our current store locations and strengthen our position in today’s retail environment. Our strategy has always been to take a holistic approach to the entire Disney portfolio, and that hasn’t changed. And portfolio optimization is definitely a core tactic within our strategy. We may add or remodel existing stores within a landlord’s portfolio or even relocate stores within the mall to a better, high-traffic location. We’ll look at a landlord’s portfolio and make the appropriate changes to meet Disney Store’s needs.
What about landlord negotiations? Have you gone back to the table for better deals?
Disney Store and RCS work closely together to manage Disney Store’s landlord relationships. We consistently review the Disney portfolio, and based on ever-changing market conditions, are always going back to the landlords to secure the best deals. If we’re going to extend that lease, we look at current market data and current sales thresholds to negotiate based on where the business is going forward, not where it was in the past. We continue to focus on our long-term strategy, and the Disney Store/RCS partnership is critical when managing new leases, renewals, amendments and market-by-market location strategies.
What is your criteria for re-negotiating with a landlord? Is it restricted to under-performing locations, or do you try to strike new deals for better performers as well?
Again, we take a holistic approach, looking at the entire portfolio and evaluating based on the portfolio as a whole and not just concentrating on underperforming locations. We look at the sales performance and occupancy to sales ratios of all stores every six months because these factors are always changing. The objective for all of our stores is to ensure that the location and the center are in the right places to provide the high-traffic needed to support our business model.
Has the new prototype store impacted your real estate strategy? Explain.
Our overall strategy hasn’t changed, in that we’re looking for the best locations at the best prices. But what is exciting is the landlords’ overwhelmingly positive response to the new design. Once they visited the prototype for the new design and saw what it had to offer, they were more open to giving us the center court locations we’re looking for. We’re now in a better position to secure those premium locations within the best centers.