updated 10/26/2007 1:32:40 PM ET 2007-10-26T17:32:40

Department-store operator Macy's Inc. on Friday said it agreed to be the exclusive department-store retailer for Tommy Hilfiger U.S.A. men's and women's sportswear in the U.S., beginning in fall 2008.

Financial terms were not disclosed. Under the deal, Macy's will expand Hilfiger merchandise in every Macy's division and on macys.com.

The deal is the latest in a slew of exclusive agreements between store chains and designers as a way to differentiate themselves in a fiercely competitive environment. But the Macy's-Tommy Hilfiger partnership is different from others because of the designer's immense popularity in the marketplace.

Tommy Hilfiger, which built big shops next to other powerhouse designer names such as Calvin Klein and Ralph Lauren in U.S. department stores, has suffered a sales slowdown in recent years. The label underwent a series of fashion makeovers to turn around sales, but the name still carries a lot of clout.

Tommy Hilfiger was acquired by private equity group Apax Partners for about $1.6 billion in December 2005.

An exclusive arrangement could help Macy's turn around its business, which has been disappointing since the 2005 acquisition of May Department Stores Inc. This fall, Macy's launched an exclusive home furnishings collection with home maven Martha Stewart, which has so far done well.

In a statement, designer Hilfiger said the recent consolidation of department stores has made the alliance "more compelling and logical."

In a statement, Terry J. Lundgren, Macy's chairman, president and chief executive, said that both men's and women's merchandise have been performing well.

"Strong and well-established brands like Tommy Hilfiger set Macy's apart," said Lundgren. "So offering this brand on a much more exclusive basis is another powerful reason for customers to choose to shop at Macy's."

As part of the deal, Macy's will increase the number of Hilfiger shops in high-volume Macy's stores, renovate and upgrade existing shops and feature Hilfiger collections in its marketing campaigns.

The companies will also work together on new ventures and brand extensions, Macy's said.

Tommy Hilfiger will continue to operate its own freestanding stores and sell its products on tommy.com.

Macy's share slipped in late morning trading.

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