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SECAUCUS, NJ-Coming off a challenging year, Children’s Place Retail Stores is exiting the Disney Store North America business, possibly selling a major portion of that chain back to Disney, the retailer said at the firm’s fourth quarter conference call.

While a new Disney Store prototype has been well received, returns are too long-term and capital outlay too high to remain in the business, explained Chuck Crovitz, Children’s Place interim CEO.

“The equation simply does not balance out in this environment,” Crovitz said.

Children’s Place and The Walt Disney Company have confirmed that they are in advanced discussions for Disney to acquire two-thirds of the chain’s 335 stores in North America. Crovitz declined to offer specifics about the remaining stores, other than to emphasize that it will exit the Disney business.

“The company believes the Disney Stores can be an important extension of the ‘Disney’ brand and, with the improved economics provided by a smaller store footprint, could add value to the company in the promotion and monetization of its growing number of robust franchises,” Disney said in a press release.

The move is one of several strategic initiatives Children’s Place is undertaking to return to profitability, which also eliminating 80 jobs (partially related to Disney), discontinuing plans for a new headquarters and cutting its namesake store expansion from 54 new units last year to 30 new stores this year. Most stores will open in the third quarter as it explores the most cost-efficient ways to roll out a new prototype. The chain also plans 17 renovations.

For the quarter, sales were $670.9 million, up 4% from the previous year. Consolidated comparable store sales increased 3%. The chain posted a loss of $58.5 million compare with earnings of $44.7 million for the same quarter last year.

For the year, sales were $2.2 billion, up 7% from the prior year. Comparable store sales rose 2%. The company reported a net loss of $59.6 million, compared with net income of $87.4 million last year.

Children’s Place owns and operates 904 Children’s Place stores and 335 Disney Stores in North America.

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