Performance. The catalyst that drives shareholder value and the single most important goal motivating Borders Group. While it can be defined in different ways, performance in our business represents the successful interplay of several long-term and short-term factors. These include delivering earnings growth, increasing total and comparable store sales, investing in the development of people and gaining market share, among others. In 2000, we simply did not create the right balance of these factors to achieve the level of performance that we know is possible when Borders Group fully leverages its formidable strengths.

On the sales front, we are proud to have achieved record consolidated sales of $3.3 billion. For the year, sales through Borders stores reached $2.1 billion by year-end, a figure that is 14 percent higher than the prior year. This is a strong achievement that provides momentum for the year ahead.

However, comparable store sales for Borders stores were 2.3 percent, clearly not up to our performance standards. Generating higher same store sales in Borders stores is our greatest challenge and a top priority for 2001. We are confident that an increase will play a significant role in unlocking shareholder value.

Core business growth will be achieved through several strategies, many of which were started in 2000. First is the management and staffing of Borders stores. Over years of rapid growth, Borders has achieved a level of store concentration in key markets, evolving into a force with significant market power. This evolution led us to a store structure that leverages this power and maintains high levels of customer service while also creating career paths for our staff and addressing compensation issues faced by all of retail.

In addition, we are addressing the marketing, merchandising and branding of Borders stores to reinforce our position as the best-in-class source for books, music, video and periodicals. Knowing that our customers love to shop all retail formats, we will also make our brands and their relationship to each other more apparent for gains in all channels.