Friday July 6, 6:35 pm Eastern Time Warner Bros. Stores to Shut by October By Jeffrey Goldfarb

NEW YORK (Reuters) - AOL Time Warner Inc. (NYSE:AOL - news) is gearing up to close its U.S.-based Warner Bros. Studio Stores by the end of October, shedding another 3,800 jobs, after failing to find a buyer for the languishing chain, a company spokeswoman said on Friday.

``We're in a wind-down process,'' the Warner Brothers spokeswoman said. ``Management decided to get out of the owned and operated retail business.''

In January, after completing the $106.2 billion deal combining America Online and Time Warner Inc., AOL Time Warner said it would look for a buyer for the retail unit, which sells merchandise carrying many of Warner Bros.' famous characters such as Bugs Bunny and Harry Potter. The company warned that if that hunt proved unsuccessful it would shut down the stores.

Analysts were not surprised at AOL Time Warner's inability to sell the shops. ``This is not the best time to have real estate in the marketplace,'' said Thomas Filandro, a retail analyst at J.P. Morgan. ``The climate has been very challenging.''

The AOL Time Warner spokeswoman would not discuss attempts to sell the stores in detail but said the effort was effectively abandoned in February. The decision to close the stores was reported recently in Denver's Rocky Mountain News, although AOL Time Warner has kept a low profile over the issue and has released no formal statement on the job losses.

The 3,800 job cuts represent about 4 percent of the company's 90,000 employees. AOL Time Warner cut 2,400 jobs following the merger, but said retail-related layoffs were not included in that figure.

Time Warner opened its first retail store in 1991. The number of locations peaked at about 130 worldwide.

Analysts have suggested that Hollywood studios have over-exploited their licenses since first entering the retail store business.

Walt Disney Co. (NYSE:DIS - news), which sells merchandise stamped with its own recognizable characters, plans to stick with its slumping retail business but has said it will cut the number of North American locations from 494 to 400 over the next four years.

Disney has also begun remodeling stores to adapt to changing shopper demands. The new look features in-store ``media'' walls showing Disney programs and interactive kiosks that permit online shopping for merchandise not found on the shelves.

Floor plans have been revamped to permit quick changes to feature seasonal items. Disney expects 20 stores to be altered by the fall and another 100 each year after that, said Sondra Haley, a Disney spokeswoman.

A number of the high-profile Warner Bros. Studio Store locations have already closed, such as its marquee Fifth Avenue shop in New York, as well as stores in Los Angeles and Palo Alto, California.

At its three-story, 40,000-square-foot Times Square store on Friday, crowds of tourists picked through discounted Scooby Doo polo shirts and Hogwarts caps under a neon sign presciently blinking ``That's All Folks.'' While no signage clearly indicated that the store would be gone soon, employees there said they knew of the impending shutdown.

About 85 U.S. stores remain to be closed, the AOL Time Warner spokeswoman said. She added that the closings will not affect about 30 non-U.S. stores, which operate under separate franchising agreements. The Times Square site will be one of the last to go, the spokeswoman noted.

AOL Time Warner announced May 17 that post-merger costs have run to about $1 billion. The cost of the store closings have already been accounted for, the spokeswoman said.

AOL Time Warner shares closed down $1.25, or more than 2 percent, at $50.11 Friday on the New York Stock Exchange

-- Guy Daley (guydaley1@netzero.net), July 06, 2001

Answers

What are we ever going to do without Porky Pig?

-- Loner (loner@bigfoot.com), July 06, 2001.

I think the most grievous losses will be Bugs Bunny, Tweety Bird, Yosemite Sam, Pepe LaPew (the amorous skunk), and Wiley Coyote (who could never catch the Road Runner).

I also always had a weak spot for that down-to-earth, common man, Elmer Fudd.

-- JackW (jpayne@webtv.net), July 06, 2001.

I say it couldn't have happened to a nicer bunch of guys -- Time-Warner, the crew who gave us all the inspirational rap CD's with instructions on how to rape women and kill cops.

-- Wellesley (wellesley@freeport.net), July 07, 2001.

I got one of these stores near enough to my house in Australia. As much as I have enjoyed warner bros cartoons AS CARTOONS, I found the garish idolatry of this shop to be truly offensive. And my first reaction too it was "F'ing yanks," more or less. Maybe I should not have such a prejudicial reaction.

It just epitomises consumption for consumptions sake...expenditure of humanity's noble constructive forces; directed towards farcickly unuseful and uncalled for outlets. Thereby exhibitibg calous mockery towards the great needy invisible majority of humans on our world.

I guess what I'm saying is that a lot of American culture that gets exxported to the colonies is rejected by most of the locals, and that their operations reflect badly on their country of origin. Just like the way soviet nuclear waste reflects terribly on the organisation that put it there.

love

-- number six (!@!.com), July 08, 2001.