As a separate and distinct business, Kids"R"Us has struggled, but it has also seen some progress. The chain's 41 "R"Generation prototype stores feature a new layout and merchandise.
Although their performance was better than that of our unrenovated stores,
we are not yet satisfied with the absolute performance of the new prototype.
A year ago, the division introduced a lifestyle concept in some of its stores; today, most stores feature this concept which comprises everything for a child's bedroom including bedding and accessories in a fun and interactive area. The lifestyle area met the division's plan for the year, and it will be expanded further in 2003.
Kids"R"Us has also moved toward a better blend of trend-right merchandise, along with making strides in visual presentation within a friendlier, easy-to-shop layout. The expansion of higher margin non-sportswear businesses such as coats and dresses has also helped make Kids"R"Us a more compelling destination for moms despite the current tough economic climate.
In 2003, Kids"R"Us will continue its efforts to drive more sales through trend-right merchandise that is competitively priced across all three divisions - Toys"R"Us combo stores, Babies"R"Us and Kids"R"Us. At the beginning of 2003, Kids"R"Us management
combined with the Babies"R"Us division, enabling it to reduce costs
and leverage operational efficiencies. This will allow the division
to focus on driving its business further with lower operating costs,
and the chain will continue to identify ways to derive additional savings
while building growth in the apparel business.