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Tragic JC Penney Story Gets a Touch of Disney Magic

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Will a kiss of Disney (DIS) wake JC Penney (JCP) from their slumber? Shoppers can see for themselves in coming weeks as the Disney "store within a store" concept becomes a reality. Stores start opening at JC Penney locations around the country this week. According to sources cited by Breakout regular Brian Sozzi at Belus Capital Advisors, the openings will continue into next month.

The Disney mini-stores are a legacy of former JC Penney CEO Ron Johnson's vision to transform the retailer into a collection of shops maintained by different vendors. This is no ordinary licensing deal with generic Disney merchandise that can be found at any retailer. The concept was originally conceived to give Disney 750 to 1,000 square feet of space crammed with exclusive merchandise.

Related: Bye, Bye Mickey! Disney Is Ready for the Next Generation

Johnson's concept for transforming department stores hinged on the notion of turning JCP locations into something resembling town squares. There were going to be barber shops and wi-fi and an endless array of ways for families to amuse themselves while spending the day at JC Penney.


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The exclusive merchandise is sure to be a step up that will have appeal to kids, but at what price?

It's important for investors to remember that the Disney build-outs were largely a sunken cost. With JCP's stock at 52-week lows and rumors of yet another capital raise in the works CEO Mike Ullman and his team have to pick and choose their battles as they unwind some of Johnson's mistakes. The company saved $7 million by eliminating wi-fi last week but ridding itself of Martha Stewart (MSO) is proving to be much more complicated and expensive.

Related: 4 Reasons JC Penney Will Survive & Thrive

Compared to some of Johnson's missteps, the Disney partnership qualifies as a home run. Disney has a stable of action hero and Star Wars tie-ins coming on line that are certainly more exciting to shoppers than whatever previously occupied the space. Maybe a light saber fight between a Prince and a Wookie will prove to be just what JC Penney needs.

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