News that Disney (NYSE: DIS) would open dozens of store-in-store boutiques inside Target (NYSE: TGT) was greeted as something magical. The power of Disney franchises coupled with a resurgent Target could only benefit both companies.
While the partnership likely won't hurt either of them, the purported benefits of the deal hardly seem momentous. Even though a broad selection of merchandise that will be on sale in Target was previously exclusive only to Disney's own retail stores, the vast majority of goods are available elsewhere. Target may be enjoying a nice bounce due to consumers responding to its new marketing strategies, but adding in a bunch of Disney tchotchkes won't move the needle far, either.
The real benefit for Target may be the opening of a store on the outskirts of Walt Disney World in Florida in 2021, though it hardly seems enough for investors to get so worked up over.
Image source: Target.
Down this road before
At a time when store closures are likely to hit 12,000 this year, about 60% more than in 2018, store-in-store boutiques are a concept that allows a retailer to expand without really having to spend any money. Disney has over 200 retail locations in North America, so the 25 boutiques it will be opening in Target this year, followed by 40 more next year, amount to something like a 33% increase in retail coverage, but without having to be out of pocket all that much on the expansion.
Even though Disney gets more exposure for its merchandise, that doesn't necessarily help the retailer that houses the boutiques. J.C. Penney (NYSE: JCP) has an expansive agreement with Disney that began back in 2012 and which has grown to over 500 store-in-store locations. Although the partnership was once hailed as one of the great turnaround ideas from the Ron Johnson era at the retailer -- and one of his few ideas that survived the subsequent purge when he was ousted -- the boutiques haven't kept the retailer from teetering on the edge of bankruptcy.
Disney Chairman of Parks, Experiences, and Products Bob Chapek told reporters on a call regarding the partnership with Target that Disney felt the deal with J.C. Penney was still successful for the entertainment giant and that deal would not be affected by the new one.
No doubt J.C. Penney is thankful for any traffic the partnership drives and any sales it makes, but it's certainly not transformational enough to lift the retailer out of the financial morass in which it's stuck. Target's arrangement, being vastly smaller than Disney's arrangement with J.C. Penney, will also not move sales enough to matter.
The daily grind goes on vacation
There is one benefit that Target will have beyond the store in Disney World that's unavailable to J.C. Penney: The 750-square-foot Disney boutiques in the Target stores will feature specific "Disney Store" signage and will reportedly be more "experiential," with seating areas where families can sit and watch movie and theme park clips.
Some 450 products from the Disney, Pixar, Marvel, and Star Wars franchises will be featured and timed ahead of the launch of the upcoming Frozen 2 and Star Wars: The Rise of Skywalker films. They will also have a presence on Target's website and through its mobile app.
Arguably, the more important news is the plan to build a Target store at the western entrance to Disney World in a mixed-use development called Flamingo Crossings. Amid hotels, time-shares, and apartments, there is also a variety of retail options going up, including a new Walgreens and Speedway gas station. It seems a prime spot for families needing groceries or other merchandise while spending time at the theme park, even though a vacation -- particularly a trip to Disney -- used to mean an escape from one's real-life grind. Now it is a central component of the experience.
Ultimately a positive though mundane deal
The partnership is a positive development for both companies, one that expands the relationship the two have had for years. But as a deal that drives meaningful sales growth, there seems a lot to be desired.
The store-in-store concept is, if not played out, no longer special, as it's something many retailers are toying with. And because the merchandise line is mostly available elsewhere, there is a lack of singularity that warrants the enthusiasm. It may be incrementally positive to Disney and Target, but it's hardly a game changer.
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Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Walt Disney. The Motley Fool has the following options: long January 2021 $60 calls on Walt Disney and short October 2019 $125 calls on Walt Disney. The Motley Fool has a disclosure policy.
This article was originally published on Fool.com