We reported consolidated net sales of $11.0 billion for the 52-week fiscal year ended February 2, 2002 versus $11.3 billion for the 53-week fiscal year ended February 3, 2001. Net sales of Toys - Japan, which has been accounted for on the "equity method" since its initial public offering, are included in our consolidated net sales in the first quarter of 2000 and excluded from our net sales thereafter. Our consolidated net sales were $11.0 billion for both years, after excluding sales of Toys - Japan. Currency translation did not have a significant impact on our consolidated net sales in 2001.

Total enterprise sales, which consist of all Toys"R"Us branded net sales from all of our stores and from our internet businesses, and the net sales from international licensed and franchised stores, were $12.6 billion in 2001 versus $12.8 billion in 2000.

Our consolidated comparable store sales, in local currencies, declined 1%. Comparable store sales for our U.S. toy store division increased 2% for the fourth quarter and declined 1% for the fiscal year. Video game sales were the primary drivers of the fourth quarter increase due to the introduction of X-Box, Gamecube and Gameboy Advance in the latter half of the year. Video game sales accounted for approximately 22% of our total U.S. toy store sales, excluding apparel sales, in the fourth quarter of 2001 as compared to 18% in the fourth quarter of the prior year. We had 433 stores in the Mission Possible format by the start of the 2001 holiday season, which also contributed to the comparable store sales increase in the fourth quarter. This gain partially offset the negative impact of 268 stores under construction during the first nine months of 2001 that were retrofitted to the Mission Possible format, as well as the negative impact resulting from the events of the September 11th terrorist attacks. Our International division reported comparable toy store sales increases of 5%, in local currencies, primarily driven by the performance of our toy stores in the United Kingdom, which reported double-digit comparable store sales growth. Our Babies"R"Us division reported 8% net sales growth, primarily driven by the opening of 20 new Babies"R"Us stores in the United States this year, as well as a 2% comparable store sales increase. Toysrus.com reported a net sales increase of 24% for the fourth quarter and 54% for the full year, which continued to reflect increases in its market share and the impact of the Toysrus.com alliance with Amazon.com that began in 2000.

Our consolidated gross margin, as a percentage of net sales, remained flat at 31.0%. Our consolidated margin for 2001 included $27 million of store closing markdowns, which were recorded as part of the restructuring and other charges announced in January 2002, and our consolidated margin for 2000 included $10 million of markdowns resulting from the alliance between Toysrus.com and Amazon.com. Excluding the impact of these items, our consolidated gross margin would have increased from 31.0% to 31.2%. Credits and allowances from our vendors, which are netted against our gross margin and have a positive impact on our cost of sales, did not vary significantly. Gross margin for the U.S. toy store division decreased 0.2% to 30.1% due to the impact of $15 million in store closing markdowns, that we recorded with the 2001 restructuring and other charges. The Babies"R"Us division reported a 1.2% improvement in gross margin to

35.0%, primarily due to a favorable sales shift to higher margin juvenile import and proprietary product. Our International toy store business reported a 0.2% increase in gross margin to 31.9%, primarily due to our continued emphasis on exclusive products.

Our consolidated SG&A, as a percentage of net sales, remained flat at 24.7% for the full year. Our consolidated SG&A for 2000 included $85 million of non-recurring charges related to the alliance between Toysrus.com and Amazon.com. Excluding these charges, our 2000 consolidated SG&A would have been 24.0% of sales. A reduction in advertising allowances, which are netted against SG&A and have a positive impact on SG&A, accounted for 0.3% of the increase in consolidated SG&A. SG&A for our U.S. toy store division increased 1.1% to 22.6%, reflecting the strategic investments we made in our business, including the renovation of our U.S. toy stores to the Mission Possible format and certain guest focused initiatives, both of which accounted for approximately 1.0% of this increase. Additional SG&A expenses resulting from the September 11th events accounted for approximately 0.1% of this increase. SG&A for our International toy store business increased 0.1% to 22.8%. SG&A for the Babies"R"Us division increased 0.4% to 23.8%, primarily attributable to increased payroll costs to support our emphasis on guest focused initiatives.

Depreciation and amortization increased by $18 million, primarily due to the Mission Possible store remodeling program, continued new store expansion and strategic investments to improve our management information systems.

Interest expense decreased by $10 million, primarily due to lower interest rates, partially offset by the impact of higher average total debt outstanding during the year. Interest and other income decreased by $15 million, primarily due to lower average investments outstanding, as well as lower interest rates.

Our effective tax rate declined to 26.9% from 36.5%. The reduction in our effective tax rate was due to the impact of the restructuring and other charges recorded in 2001.

Neither foreign currency exchange nor inflation had a significant impact on our consolidated net earnings in 2001.

In January 2002, we announced plans to reposition our business and, as part of this plan, we closed 27 non-Mission Possible format Toys"R"Us stores and 37 Kids"R"Us stores. In conjunction with the Kids"R"Us store closings in most all of these locations, we converted the nearest Toys"R"Us store into a Toys"R"Us/Kids"R"Us combo store.

As part of this plan, we eliminated approximately 1,700 staff positions in our stores and our headquarters. In addition, these plans included the costs of consolidating five of our store support center facilities into our new headquarters in Wayne, New Jersey, in 2003.

The costs associated with the facilities' consolidation, elimination of positions, and other actions designed to improve efficiency in support functions were $79 million, of which $15 million related to severance. The costs associated with store closings were $73 million for Kids"R"Us and $85 million for Toys"R"Us, of which $27 million was recorded in