CINCINNATI - FAO Schwarz will open toy stores in nearly 700 Macy's department stores over the next two years in a move that both retailers hope will drive traffic in a tough economic environment.
The two companies said Friday that about 75 full-size FAO Schwarz toy stores will open across the country in the fall, along with about 200 smaller shops. Macy's shareholders learned of the venture at their annual meeting Friday.
Macy's chief executive Terry Lundgren told shareholders that FAO Schwarz will open stores in up to 275 of Macy's stores this fall, and the companies plan to expand over the next two years to include 685 Macy's stores that have children's departments.
"We expect it to drive new customers into our stores and to insert a new level of fun and excitement onto the children's selling floor," Lundgren said.
Lundgren said FAO Schwarz tested its first Macy's store-within-a-store in Chicago last year. "Not only did it perform beyond our expectations, the entire children's apparel business performed well above our expectations."
Lundgren told reporters after the meeting that the deal was one more step toward reinventing department stores - one that he said would give customers another reason to choose Macy's over its competitors.
Patricia Edwards, a retail analyst with Wentworth, Hauser and Violich, thinks the move is a good one. "Macy's had gotten away from having a toy department, but I think that if you can incorporate more of the shopping experience and give the consumer one more reason to come into the store and keep them in your store longer, it's a good thing," Edwards said.
FAO Schwarz chief executive Ed Schmults said that products in the smaller shops will be from the FAO private label collection, but the larger stores will carry a mix of private label and other brands sold by FAO Schwarz. The 146-year-old company continues to independently own and operate its own stores, including a flagship store on New York's Fifth Avenue.
FAO Schwarz now employees about 400 people, but Schmults expects that number to more than double by year's end.