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Toy Stories


"Unless you're Apple you should leave retail to the retailers."


Shopping as a Family Brand Extension

My dad and I would go shopping the way other fathers and sons would play catch. On weekends we would travel from store to store checking lay-outs, traffic flows and upkeep with my dad alternating between giving me lectures on what makes a store work and falling into the role of Mystery Shopping customer to test the employees' readiness for any variety of shopper types (he was particularly good at "impatient guy with a lot of questions").

He taught me the other father-son stuff as well but the lessons on retail have more application in my day to day life. Put it this way, "respect the customer" and "if you don't want to get hurt hit other guy harder than he hits you" are both useful ideas but the latter has never made me any money.

So it was with a nearly giddy sense of nostalgia and pride that I loaded up the entire Wolf Pack for a trip into the City last weekend. Mrs. Jeffmacke was going to the salon, the Nanny and one year old SuperFly were going to the park. That left two hours for three- going on four-year-old Helena "Lou" and her dad to hit the kid-friendly stores on Fifth Avenue. We'd need every minute and then some.

Fittingly, our theme for the day was brand extensions with a focus on subsidiaries of Children's Place (PLCE) and Mattel (MAT).

Children's Place Disney Store

After making our way through Central Park and FAO Schwarz, neither of which you can invest in, we entered the Disney Store on Fifth Avenue. These stores aren't actually run by Disney (DIS); Children's Place signed a deal to take over control of all the American locations in 2004. Under Disney's control, the stores were a money-sucking, brand-damaging example of why it is that consumer brand companies shouldn't do retail. The Disney stores somehow took the greatest portfolio of characters in the world and killed every bit of joy with merciless efficiency.

The prices were too high and the aesthetics relied on the charm of the characters to make-up for relatively stark lay-outs. Years ago a friend of mine characterized the theme of the Disney stores as "a bunch of $30 silk-screened tee shirts dumped under a wooden Mickey Mouse with a pole rammed up his ass." That about captured it.

Now, two years after signing a 50-year deal to run the stores, Children's Place has managed to make them everything they always should have been. The prices are in line with what parents expect to pay and the products take full advantage of the characters. The stores aren't a trip to the theme park but they are genuinely fun places to be, both for a 3 year old girl and her cynical dad.

PLCE now runs 831 Children's Place stores (focused on apparel) and 328 Disney Stores. The insanely strong comps PLCE has been posting of late aren't a fluke, from where I'm sitting; these guys Get It. The turnaround at the Disney Stores is what happens when good merchants are given great products to work with and both of PLCE's divisions have room to grow, if they stay on track.

Mattel's American Girl

American Girl is a tiny division of toy juggernaut Mattel. They sell build-to-suit dolls that girls can customize and dress in countless different ways. Think of them as a Build-a-Bear (BBW) for older kids. Between web sales and their three flagship stores, American Girl did $72 million in sales last quarter as compared to $1.79 billion for parent Mattel.

While the concept is popular and the store was packed, the American Girl store was absent any of the magic found at Disney or, for that matter, Build-a-Bear. There should be something wonderful about being able to build a doll just the way your daughter wants it; choosing everything from her hair to her insanely marked-up outfits. It should give your kid the chance to build something they will, in some small way, experience with the same sense of pride a parent gets from seeing little bits of themselves in their own kids.

Disappointingly, the American Girl stores are more like the Disney stores of 1996 than the ones of today. As one example, shoppers choose the head for their doll from some 2 dozen different options. This would be neat had AG not chosen to display all the selections under Plexiglas with labels like "10-G-QH" rather than, say, "Suzie." The target customer for the store may be a little older than my daughter but I'm not even sure I'm ready to pick and choose from 25 impaled doll heads.

The closest American Girl came to creating joy with me and Lou was when, after about 10 minutes, she turned to me and asked if we could go back to the Disney store. "The kid is repulsed by bad retail" I thought with a lump in my throat, "just like her old man and her Grandpa before her."

American Girl isn't going to go anywhere until they get some real merchants to run the place. Mattel doesn't need the growth from a retail division right now; and it's a good thing they don't because it's not going to happen from AG.

No positions in stocks mentioned.

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