FAO, Inc., expanding on its strategy of alliances with other retailers, has signed a letter of intent with Borders Group subsidiaries Waldens and Borders to cooperate on initiatives in each other's stores.  Borders will begin making recommendations about the merchandising of books, music, and video in FAO stores (FAO Schwartz, Zany Brainy, and The Right Start) and supply the inventory.  This will lead to Borders Group managing the inventory of those departments in FAO stores. 

In the other direction, Borders and Waldenbooks stores will test FAO-operated collections of toys, educational and developmental products under the Zany Brainy and FAO Schwartz brands.  The test will begin this fall, and will involve up to 25 Borders stores and 12 Waldenbooks stores.

FAO has already begun implementing its alliance with department store retailer Saks Department Store Group. Sixteen boutiques have been established in Group stores to date, another six are scheduled for September (including the first in Saks-branded stores;  the others are in other department store chains operated by the Saks Group).  And FAO will install seasonal FAO Schwartz boutiques in 230 SDSG department stores and 9 Saks Fifth Avenue stores.