May 19, 2008 6:01 AM, PROMO Xtra

Macy’s, Inc. has signed a deal to open FAO Schwarz toy stores in 275 of its retail locations this year, with a larger rollout expected over the next two years.

Under the deal, FAO Schwarz has named Macy’s the exclusive U.S. retail store host for its Schwarz departments becoming the exclusive toy department in Macy’s stores. FAO Schwarz will continue to independently own and operate its own locations.

“This is an outstanding partnership that will bring toys back to Macy’s in an exciting and unique way,” said Terry J. Lundgren, chairman, president and chief executive officer of Macy’s, Inc., in a statement.

The partnership will expand into 685 stores through 2010. This fall, full-size toy shops ranging from 1,000 to 3,500 square feet will open in 75 Macy’s locations. Another 200 stores will host smaller departments of 200 to 300 square feet. FAO Schwarz products will also be sold on http://www.macys.com

Macy’s will feature its own private label collection of FAO Schwarz toys, as well as a select group of brands made popular by the toy store chain. The FAO Schwarz store-within-a-store concept was tested last fall at Macy’s in Chicago.

The partnership is part of a broader strategy by Macy’s to carry exclusive products, including Martha Stewart, Donald Trump and Tommy Hilfiger.

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