That commitment and focus has made Babies"R"Us the leader in the juvenile market today with a Baby Registry that registers more expectant parents than any other retailer in the U.S.

It's also the formula that has led Babies"R"Us to its sustained record of growth over the past five years. In 2002, Babies"R"Us marked another record-setting year posting a 12% increase in total sales for the year, with a 26% increase in operating earnings and a 10.9% operating margin, the highest in its history. Babies"R"Us also had the highest guest delight scores of any "R"Us division and opened 19 new stores last year. All in all, 2002 proved to be another good year for a chain that has already turned its focus to delivering an improved 2003.

Babies"R"Us plans to energize same store sales, continue earnings growth, drive new store growth, and commence an aggressive strategy of renovations and refurbishment of existing stores. Babies"R"Us is well aware of the role it plays in the "R"Us organization - particularly in the first three quarters of the year. That's why it's continuing to ramp up its ongoing efforts to develop unique merchandise concepts that provide better margins and differentiate Babies"R"Us from the competition. Much of this exclusive merchandise also helps the division to create a high-end cachet while still maintaining competitive pricing. Private label and exclusive products already represent a significant percentage of Babies"R"Us offerings. Labels such as Koala Baby, Especially for Baby and Baby Trend are a few examples of unique product lines available only at Babies"R"Us, and plans are in place to broaden offerings like those even further in 2003.

The division is also looking at further enhancing its store layout design with new, innovative concepts this year, as well as building on its marketing programs. Marketing efforts such as Baby Fest weekends, which highlighted products and services, received a positive response from customers in 2002, as did a new program targeted specifically for grandparents. Plans are also on the horizon to add some new complements to the highly successful Baby Registry.

Finally, Babies"R"Us is on track to open up to 20 new stores in 2003 and anticipates the refreshment of a number of existing locations. On schedule, on budget and continually looking for ways to build the business, Babies"R"Us is living up to its reputation as "The Baby Superstore."