Media and entertainment giant Walt Disney Co (NYSE: DIS) stated that it intends to shut down 20% of its physical stores by the end of 2021 and focus more on online (e-commerce) business. The decision was taken following the change in consumer behaviors and a plan to connect its online shopping platform to Disney Park apps and other social media networks.
The market did not react positively to the news. The share of Disney lost $4.23 or 2.20% to close at $188.03. Since the beginning of this year, the stock has gained 6%. Likewise, in the past 12 months, the stock has appreciated over 65%.
The Burbank, California-based Disney revealed that at least 60 of its physical stores are planned to be shut down this year. Stephanie Young, president of consumer products, games, and publishing, highlighted the change in consumer shopping patterns and the COVID-19 pandemic as the main reason for the decision. “While consumer behavior has shifted toward online shopping, the global pandemic has changed what consumers expect from a retailer.”
As per data provided by IBM’s US Retail Index, the pandemic’s arrival has expedited the move away from brick-and-mortar shops to online shopping by roughly five years. Across the US, online sales surged 32.4% to $791.70 billion last year, and analysts believe a further increase in online sales in the years ahead.
Disney intends to begin shutting down one-fifth of its total Disney shops and then assess the need to shut down other shops. Specifically, Disney looks at Europe for further closure of shops. Notably, the company did not divulge the closure’s financial implications but acknowledged that there would be an undisclosed downsizing of employees.
Disney also refrained from listing the shops that would be impacted.
The company has clarified that other customer-focused facilities, including over 600 Disney Parks, shop-in-shop venues in stores such as lifestyle, Target and outlet venues, and associate (third-party) retailers worldwide, will not be affected.
Through a partnership, mini Disney Stores were set up within the premises of Target, which has expanded its presence to over 50 locations from 25 in 2019. Disney did not reveal its plan for future sites.
The company states that it is taking measures to overhaul its online shopping platform ShopDisney and increase the range of products offered for sale. In particular, Disney aims to include many more adult dress materials, premium home goods, streetwear, and collectibles. In general, Disney Stores tend to offer a refined collection of toys, children’s apparel, and games. The online platform is expected to serve people of different age groups following the overhaul.
Disney is anticipated to provide additional details about the website overhaul and product info in the days ahead.
As the decision to close down stores is made to improve the company’s bottom line in the months ahead, the stock is expected to turn bullish in the days ahead.
The price chart indicates that the stock continues to move along the ascending trend line. The stock is trading above its 50-day moving average, while the MACD indicator has a positive reading. Therefore, we are anticipating the stock to resume its uptrend in the days ahead.
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