In just six years -- and with 165 stores -- Babies“R”Us has grown quickly to its current status as one of the premier baby product retailers in America.

In 2001, the division posted an impressive 15 percent operating profit growth. We opened 20 new stores and remodeled many existing Babies“R”Us stores, continuing to create the most rewarding shopping experience possible. Our 2002 plans call for 20 more stores that will intensify our market presence and innovative product offerings that will provide consistent growth across all categories.

Our new Baby Registry area is warmer and more inviting than ever!

Building lasting relationships with families

Babies“R”Us is always focused on the needs of our guests, especially new and expectant parents. Our buyers continually ensure that we offer innovative products, many of which -- like the Exersaucer^TM and Diaper Genie® -- are groundbreaking. Our generous merchandise assortment and three private brand product lines -- Especially for Baby®, Koala Baby® and Baby Trend -- have babies covered, from nursery furniture to car seats, from safety products to baby clothing and accessories.

New product developments for Babies“R”Us in 2001 included our innovative adjustable Baby Trend High Chair and our exclusive high quality Koala Baby sheets and bedding. We also introduced a new, “lifestyle” design for our Babies“R”Us Baby Registry program.

The look and feel of our stores reflect the changing needs of our customers as well. In 2001, we developed an exciting new store prototype -- incorporating a welcoming warmth of color, design and ambience -- which will be incorporated in our new stores this year.

Introducing shopping innovations and benefits

Making shopping for baby items easy, convenient and pleasant is a primary mission of Babies“R”Us, and one we ensure through benefits like free gift wrap, special orders and our low price guarantee. And we never take anything for granted. Services like our Baby Registry, continuity program (pre-and post-natal age targeted, educational mailers), highly trained associates and comfortable Mother’s Room all help delight our guests.

Continuing to renovate, innovate and grow

To meet the needs of different communities and customers, we operate three distinct store sizes, each tailored to the specific market it serves. In 2002, we will introduce four of the smaller, 24,000-square foot prototype stores, two of which will include new design elements to delight customers.

At the same time, we will continue to invest in existing stores, renovating and improving our Babies“R”Us portfolio. By offering the best product selection, memorable shopping experience and responsive guest service in the juvenile retail industry, we will strengthen our position as the foremost baby authority.