About 75 full-size FAO toy stores will open across the country in the fall, along with about 200 smaller shops that will be up to 300 square feet, the companies said.

Macy's shareholders were told of the venture during their annual meeting Friday. CEO Terry Lundgren said that the retailer's financial performance hasn't been what he would like, but that Macy's has outperformed most of its large competitors in terms of same-store sales.

FAO Schwarz gave its first Macy's store-within-a-store a trial run in Chicago late last year. There are 685 Macy's-FAO toy stores planned over the next two years.

"This is an outstanding partnership that will bring toys back to Macy's in an exciting and unique way," said Lundgren, chairman, president and chief executive officer of Cincinnati-based Macy's. "FAO Schwarz is the world's most famous toy retailer with interesting and distinctive products that appeal to our customers and will drive store traffic, particularly to our children's departments."

FAO Schwarz will sell its private label collection at Macy's stores. The 146-year-old company continues to independently own and operate its own stores, including a flagship store on New York's Fifth Avenue.

Macy's, formerly known as Federated Department Stores, operates more than 850 department stores in 45 states, the District of Columbia, Guam and Puerto Rico under the names of Macy's and Bloomingdale's.

"Our two brands have a combined history of 296 years of bringing joy and retail magic to consumers," said Edward Schmults, chief executive officer of FAO Schwarz. "I am thrilled that, through Macy's, we will be able to offer the FAO Schwarz products to every American family."

---

On the Net:

Macy's, Inc.: http://www.macys.com

FAO Schwarz: http://www.fao.com

© 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Learn more about our Privacy Policy.