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Macy's, FAO Continue to Expand Pact

Macy's and FAO Schwartz, which originally teamed up last September and then expanded the partnership in October have decided to go even further. Now, FAO Schwartz will open boutiques in nearly 700 Macy's locations.

Out of Macy's 812 locations, as many as 275 will have the toy boutiques by fall, in time for the holiday shopping season, while the rest will open in 2009 and 2010, the report said.

Under the terms of the agreement, FAO Schwarz will lease floor space in the stores and pay the department store operator an undisclosed percentage of sales as rent, the Journal added.

The new boutiques will include FAO Schwarz's private label toys and independent brands like Alex crafts and Lionel trains, the report said.

Macy's is trying to boost its sales at the same time U.S. shoppers have become hesitant with their spending, cutting down on mall trips and purchases of items like clothes and furniture, as gas prices rise and home values decline.

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