Total sales, excluding sales of Toys 'R' Us - Japan which is accounted for on the "equity method" since its initial public offering on April 24, 2000, declined 2% for the third quarter and were unchanged for the first nine months of fiscal 2001, compared with the same periods in fiscal 2000.

The company reported a net loss of $44 million, or $(0.22) per share, for the third quarter of fiscal 2001, compared with a net loss of $5 million, or $(0.02) per share reported for the third quarter of fiscal 2000. The company reported a net loss of $91 million, or $(0.46) per share, for the first nine months of fiscal 2001, compared with net income of $13 million, or $0.06 per share reported for the first nine months of fiscal 2000. For comparability purposes, all fiscal 2000 amounts above exclude the impact of non-recurring charges related to the Toysrus.com/ Amazon.com alliance, as well as the gain from the IPO of Toys 'R' Us - Japan. (All per share figures refer to diluted per share amounts.)

John Eyler, Chairman and Chief Executive Officer, stated, "The third quarter was obviously a challenging one for Toys 'R' Us. As we indicated in our statement of October 9, events associated with September 11 had a $0.09 per share negative impact on our earnings this quarter. In addition to the difficult economic climate, our results also reflect substantial investments in our remodeling program and initiatives to enhance the customer experience in our U.S. toy stores. However, we are confident that the improvements we have made will deliver substantial benefits to Toys 'R' Us Us beginning in this year's holiday season, and will allow us to better grow and increase the profitability of our business well into the future."

"Despite the challenges of the third quarter, we are very proud of several achievements across our business. First, we exceeded our goal of 415 total Mission Possible store renovations, and we now have 433 Mission Possible stores as we begin the all-important holiday season. Importantly, our renovated Mission Possible stores continue to outperform our traditional format stores. Those Mission Possible stores that were renovated last year have maintained their 7% sales gap year-to-date. Performance in stores renovated this year is ramping up nicely as well. Year-to-date our 2001 store renovations have a positive gap of more than 5%."

"Second, we launched our new advertising campaign to reposition the Toys 'R' Us brand. This campaign, which appears nationally in print and on television and radio, is off to an excellent start. Consumer awareness of our advertising has jumped more than 20 percentage points since the campaign began."

"Finally, we held the Grand Opening of our new international flagship store in Times Square just this past weekend. We are delighted by the extremely positive response we have received thus far from our vendors, the media, our own employees, and, most importantly, from our customers."

Mr. Eyler concluded, "Like all retailers, we recognize the risks posed by the current environment. However, we believe the beginning of a new video cycle along with a host of desirable new products will generate significant excitement in the toy category. We also have a number of powerful initiatives at Toys 'R' Us for the holiday period including the Animal Alley/McDonald's Happy Meal promotion at 13,000 McDonald's restaurants -- Animal Alley miniature plush characters will be distributed in Happy Meals nationwide from November 30th through December 27th. Assuming our sales meet our current forecast, Toys 'R' Us is well-positioned to deliver positive results in the fourth quarter of fiscal 2001, and to meet current consensus estimates for the year."

Business Segment Performance

Comparable store sales in the U.S. toy stores declined 9% during the third quarter. Approximately one third of this decline is attributable to the events of September 11. Strong sales of scooters in last year's third quarter and a difficult two-year comparable store sales gain of +12% also negatively impacted results.

Comparable store sales in the International division in local currencies increased by 7% for the quarter. Performance in the U.K. division continued to be especially strong with a double-digit comparable store sales gain for the quarter. Many of the initiatives underway in the Company's U.S.A. toy stores are also being implemented in the international stores, including improvements in merchandise content and presentation as well as customer service programs.

The Babies 'R' Us business posted a 1% comparable store sales increase for the third quarter of 2001 on top of a double digit increase last year, despite the difficult retail environment. More importantly, the Babies 'R' Us division achieved its profit goals for the quarter, increasing operating earnings in the division by 19% in comparison with the year-ago period. Babies 'R' Us has opened 14 new stores to date this year, and expects to open 6 additional new stores by fiscal year-end.

The Kids 'R' Us business reported a 2% comparable store sales decline versus the year-ago third quarter. However, the Company continues to be very pleased with its new merchandising initiatives and the performance of its nine new prototype stores. These stores have yielded very encouraging customer reactions and strong double-digit sales gains. Toys 'R' Us now expects to renovate an additional 40 Kids 'R' Us stores to the new prototype in 2002. The Company also converted approximately 90 existing toy stores to Toys 'R' Us/ Kids 'R' Us combo stores during 2001.

At Toysrus.com, sales increased to $39 million for the third quarter of fiscal 2001 compared with $23 million for the third quarter of fiscal 2000. Operating losses at Toysrus.com were $17 million in the third quarter, in line with expectations, and down from $30 million in last year's third quarter, excluding the impact of the non-recurring charges resulting from the alliance with Amazon.com.

Toys 'R' Us -- The world's leading resource on kids, families and fun currently operates 1,599 stores: 703 toy stores in the United States; 504 international toy stores, including franchise stores; 185 Kids 'R' Us children's clothing stores, 159 Babies 'R' Us stores and 48 Imaginarium stores. Toysrus.com sells merchandise through its Internet sites at http://www.toysrus.com, http://www.babiesrus.com and http://www.imaginarium.com.