===================================================================



                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                  ============
                                    FORM 10-Q
                                  ============

             QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

               For the quarterly period ended August 4, 2001




                                ============

                      Commission file number 1-11609

                             TOYS "R" US, INC.
                Incorporated pursuant to the Laws of Delaware

                                ============
           Internal Revenue Service - Employer Identification No. 22-3260693
                   461 From Road, Paramus, New Jersey, 07652
                              (201) 262-7800

                   225 Summit Avenue, Montvale, New Jersey 07645
                              (201) 802-5000
                 (Former Reporting Address and Telephone Number)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports)  and  (2)  has  been  subject  to such  filing
requirements for the past 90 days. Yes [X] No [ ]

198,526,134 shares of the registrant's Common Stock were outstanding
on September 4, 2001.

===============================================================================


<PAGE>











                                          INDEX



                                                                           PAGE

PART I - FINANCIAL INFORMATION


         Item 1. Financial Statements


                  Condensed Consolidated Balance Sheets...................... 2


                  Condensed Consolidated Statements of Operations.............3


                  Condensed Consolidated Statements of Cash Flows.............4


                  Notes to Condensed Consolidated Financial
                  Statements..................................................5

         Item  2.   Management's   Discussion  and  Analysis  of  Results  of
                    Operations  and  Financial Condition.....................10


PART II - OTHER INFORMATION..................................................18


SIGNATURES...................................................................19



                                                         1


<PAGE>
<TABLE>





                                 TOYS "R" US, INC. AND SUBSIDIARIES
                               CONDENSED CONSOLIDATED BALANCE SHEETS
                                             (Unaudited)
                             ==========================================
                                            (In millions)


ASSETS                                         August 4,   July 29,  February 3,
------
                                                  2001       2000         2001
                                               ---------- ---------- ----------
<CAPTION>
<S>                                             <C>          <C>         <C>
Current Assets:
 Cash and cash equivalents ...................   $  268    $  430    $  275
 Accounts and other receivables ..............      164       181       225
 Merchandise inventories .....................    2,437     2,303     2,307
 Prepaid expenses and other current assets ...      104        81       100

                                                  ------   ------    ------
        Total current assets .................    2,973     2,995     2,907

Property and equipment, net and other assets ...  4,780     4,487     4,627
Investment in Toys - Japan (market value of $483
 at August 4, 2001).............................    109        94       108
Goodwill, net ..................................    354       367       361

                                                  ------    ------    ------
                                                  $8,216    $7,943    $8,003
                                                  ======    ======    ======

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
  Short-term borrowings ........................  $  495    $  779    $  121
  Accounts payable .............................   1,036     1,216     1,152
  Accrued expenses and other current liabilities     516       530       837

  Income taxes payable .........................     213       242       241

                                                  ------    ------    ------
            Total current liabilities ...........  2,260     2,767     2,351


Long-term debt .................................   1,926     1,131     1,567
Deferred income taxes ..........................     401       352       402

Other liabilities ..............................     194       191       195


Minority interest in Toysrus.com ...............      63        55        70

Stockholders' equity ...........................   3,372     3,447     3,418
                                                  ------    ------     ------
                                                  $8,216    $7,943    $8,003
                                                  ======    ======     ======

                See notes to condensed consolidated financial statements.
<FN>

</FN>
</TABLE>



                                            2


<PAGE>
<TABLE>





                       TOYS "R" US, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (Unaudited)
               ===================================================
                     (In millions, except per share data)

<CAPTION>

                                      13 Weeks Ended         26 Weeks Ended
                                   August 4,    July 29,    August 4,  July 29,
                                      2001       2000       2001       2000
                                    -------    -------    -------    -------
<S>                                  <C>         <C>         <C>        <C>

Net sales .......................   $ 2,021    $ 1,994    $ 4,082    $ 4,313
Cost of sales ...................     1,360      1,358      2,756      2,959
                                     -------    -------    -------    -------

     Gross Margin .................     661        636      1,326      1,354

Selling, general and
 administrative expenses ..........     602        547      1,197      1,146
Depreciation and amortization ........   73         67        146        139
Equity in net loss / (earnings) of
  Toys - Japan                            2         (5)        (3)        (5)
                                     -------    -------    -------    -------
     Total Operating Expenses ......... 677        609      1,340      1,280
                                     -------    -------    -------    -------

     Operating (Loss) / Earnings ....   (16)        27        (14)        74

Other income (expense):
     Interest expense - net ..........  (30)       (23)       (60)       (46)
     Gain from IPO of Toys - Japan ..    --         --         --        315
                                      -------    -------    -------    -------

(Loss) / earnings before income taxes ..(46)         4        (74)       343
Income taxes ...........................(17)         1        (27)       125
                                      -------    -------    -------    -------

Net (loss) / earnings ...........   $   (29)   $     3    $   (47)   $   218
                                      =======    =======    =======    =======

Basic (loss) / earnings per share   $ (0.15)   $  0.01    $ (0.24)   $  0.98
                                      =======    =======    =======    =======
Weighted average basic
shares outstanding .....              198.4      214.7      198.0      222.3
                                     =======    =======    =======    =======


Diluted (loss) / earnings per share $ (0.15)   $  0.01    $ (0.24)   $  0.97
                                      =======    =======    =======    =======
Weighted average diluted
shares outstanding ...                208.2      217.9      208.0      224.6
                                     =======    =======    =======    =======

<FN>
</FN>

</TABLE>


               See notes to condensed consolidated financial statements.








                                        3


<PAGE>
<TABLE>


                         TOYS "R" US, INC. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                     (Unaudited)
                 ====================================================
                                   (In millions)


<CAPTION>

                                                             26 Weeks Ended
                                                           -----------------
                                                        August 4,   July 29,
                                                          2001       2000
                                                         -------    -------
<S>                                                        <C>          <C>

Cash Flows from Operating Activities:
Net (loss) / earnings ..........................        $   (47)   $   218
Adjustments to reconcile net (loss) / earnings
 to net cash from operating activities:
      Depreciation and amortization ..................      146        139
      Deferred income taxes ..........................       --         33
      Minority interest in Toysrus.com ...............       (8)        (5)
      Equity in net earnings of Toys - Japan .........       (3)        (5)
      Gain from initial public offering of Toys - Japan      --       (315)
      Changes in operating assets and liabilities:
         Merchandise inventories .......................   (144)      (470)
         Accounts payable and other operating liabilities  (463)      (211)

         Other operating assets .........................    39        (78)
                                                          -------    -------
Net cash from operating activities ......................  (480)      (694)
                                                          -------    -------
Cash Flows from Investing Activities:
Capital expenditures, net ...............................  (296)      (103)
Net proceeds from sale of Toys - Japan common stock .....   --         267
Reduction in cash due to deconsolidation of Toys - Japan    --         (15)
                                                          -------    -------
Net cash from investing activities .....................   (296)       149
                                                          -------    -------
Cash Flows from Financing Activities:
Short-term borrowings, net ..........................       (92)       610
Long-term borrowings ................................     1,214        147
Long-term debt repayment ............................      (388)       (17)
Exercise of stock options ...........................        18         --
Proceeds received from investors in Toysrus.com .....        --         60
Issuance of stock warrants ..........................        --         10
Share repurchase program.............................        --       (449)
                                                         -------    -------
Net cash from financing activities ..................       752        361
                                                         -------    -------

Effect of exchange rate changes on cash and
 cash equivalents                                            17         30
Cash and cash equivalents:
Decrease during period ..............................        (7)      (154)
Beginning of period .................................       275        584
                                                         -------    -------
End of period .......................................   $   268    $   430
                                                         =======    =======

Supplemental disclosures of cash flow information:
Net income tax refunds ..............................   $    11    $    47
                                                         =======    =======

Interest paid .......................................   $    45     $   58
                                                         =======    =======
<FN>


              See notes to condensed consolidated financial statements.

</FN>
</TABLE>
                                        4
<PAGE>


                       TOYS "R" US, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                        (Unaudited)
           ==========================================================

1.       Interim reporting
         The interim condensed consolidated financial statements are unaudited
         and are subject to year-end adjustments. However, in the opinion of
         management, all known adjustments (which consist primarily of normal
         recurring accruals), have been made and the interim financial
         statements present fairly the consolidated financial condition and
         operating results for the unaudited periods. Because of the seasonal
         nature of the company's business, results for interim periods are not
         indicative of results to be expected for the fiscal year.

         The financial statements and notes are presented in accordance with the
         rules and regulations of the Securities and Exchange Commission and do
         not contain certain information included in the company's annual
         report. Therefore, the interim statements should be read in conjunction
         with the company's annual report for the fiscal year ended February 3,
         2001.

2.       Reclassification
         Certain amounts in the financial statements for the quarter and six
         months ended July 29, 2000 have been reclassified to conform to the
         financial statement presentation for the quarter and six months ended
         August 4, 2001.

3.       Commercial paper
         Commercial paper of $368 million was classified as long-term debt at
         July 29, 2000 and February 3, 2001 as the company maintained long-term
         committed credit agreements to support these borrowings and intended to
         refinance them on a long-term basis through commercial paper
         borrowings. During July 2001, the company issued an aggregate of $750
         million of notes and used the proceeds to repay a portion of its
         outstanding commercial paper, of which $368 million was classified as
         long-term. Additionally, commercial paper of $455 million and $760
         million are included in short-term borrowings at August 4, 2001 and
         July 29, 2000, respectively.

4.       Comprehensive income
         Comprehensive (loss) / income was ($33) million and $24 million for the
         second quarter ended August 4, 2001 and July 29, 2000, respectively, as
         a result of the change in foreign currency translation. Comprehensive
         (loss) / income was ($77) million and $184 million as a result of the
         change in foreign currency translation for the 26 weeks ended August 4,
         2001 and July 29, 2000, respectively.

5.       Gain from initial public offering of Toys - Japan, Ltd.
         The company recorded a pre-tax gain of $315 million in the first
         quarter of fiscal 2000 resulting from the initial public offering of
         shares of Toys - Japan. As a result of this transaction, the company's
         ownership percentage in the common stock of Toys - Japan was reduced
         from 80% to 48%. Toys - Japan is a licensee of the company.








                                        5

<PAGE>


                       TOYS "R" US, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)
           ==========================================================


6.       Investment in Toys - Japan
         The company accounts for its investment in the common stock of Toys -
         Japan on the "equity method" of accounting since the initial public
         offering of Toys - Japan on April 24, 2000. At August 4, 2001, the
         quoted market value of the company's investment in Toys - Japan was
         $483 million. The valuation represents a mathematical
         calculation based on the closing quotation published by the Tokyo
         over-the-counter market and is not necessarily indicative of the amount
         that could be realized upon sale.

7.       Toysrus.com
         Toysrus.com has a 10-year strategic alliance with Amazon.com to create
         a co-branded toy and video games on-line store, which was launched in
         the third quarter of 2000, a co-branded baby products on-line store,
         which was launched in May 2001, and a co-branded creative and learning
         products on-line store, which was launched in July 2001. Under this
         alliance each company is responsible for specific aspects of the
         on-line stores. Toysrus.com is responsible for merchandising and
         content for the co-branded stores. Toysrus.com also identifies, buys,
         owns and manages the inventory. Amazon.com handles web site
         development, order fulfillment, customer service, and the housing of
         Toysrus.com's inventory in Amazon.com's U.S. distribution centers.

         As a result of the transition to the co-branded site in fiscal 2000,
         the company's Toysrus.com subsidiary recorded non-recurring costs and
         charges, before minority interest, totaling approximately $118 million,
         $10 million of which were included in cost of sales and $108 million of
         which were included in selling, general and administrative expenses,
         primarily relating to the closure of three distribution centers, the
         write-off of web site assets, as well as other costs associated with
         migrating data and merchandise to the new site and facilities. At
         August 4, 2001, the company has remaining reserves of approximately $72
         million, primarily related to exit costs for distribution centers.
         Management believes these reserves to be reasonable estimates of what
         is required to complete these initiatives.

8.       Replacement of certain stock option grants with restricted stock
         On March 24, 2000, the company authorized the exchange of certain stock
         options, having an exercise price above $22 per share, for an
         economically equivalent grant of restricted stock. The exchange, which
         was voluntary, replaced approximately 14.4 million options with
         approximately 1.7 million restricted shares. Shares of restricted stock
         resulting from the exchange vest over a period of three years, with
         one-half of the grant vesting on April 1, 2002 and the remainder
         vesting on April 1, 2003. Accordingly, the company recognizes
         compensation expense on a straight-line basis throughout the vesting
         period of the restricted stock. The company recorded $4.6 million and
         $2.9 million of compensation expense related to this restricted stock
         in the first six months ended August 4, 2001 and July 29, 2000,
         respectively.







                                        6

<PAGE>

                       TOYS "R" US, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
             ==========================================================


9.       Long-term Debt
         On July 19, 2001, the company issued $500 million of notes bearing
         interest at 7.625% per annum maturing on August 1, 2011 and $250
         million of notes bearing interest at 6.875% per annum maturing on
         August 1, 2006. Simultaneously, the company entered into interest rate
         swap agreements. Interest on the $500 million notes will accrue at the
         rate of LIBOR plus 1.5120% per annum and interest on the $250 million
         notes will accrue at the rate of LIBOR plus 1.1515% per annum. Interest
         is payable on both notes semi-annually on February 1 and August 1 of
         each year, commencing on February 1, 2002.

         On February 13, 2001, the company borrowed 500 million EURO through the
         public issuance of a EURO bond bearing interest at 6.375% per annum.
         This obligation was swapped into a $466 million fixed rate obligation
         at an effective rate of 7.43% per annum with interest payments due
         annually and principal due on February 13, 2004.

         On July 21, 2000, the company borrowed the yen equivalent of $147
         million, which is repayable in semi-annual installments of principal
         and interest, with the final installment due on August 17, 2005. The
         effective cost of this borrowing is 2.32% and is secured by expected
         future cash flows from license fees due from Toys - Japan.

10.      Financial Instruments
         In June 1998, the Financial Accounting Standards Board issued SFAS No.
         133 "Accounting for Derivative Instruments and Hedging Activities," as
         amended, which was adopted by the company effective February 4, 2001.
         This standard requires that all derivatives be recorded in the balance
         sheet at fair value and that all changes in fair value be recognized
         currently in earnings unless specific hedge criteria are met. The
         cumulative effect of adoption was not material to the company's
         consolidated financial condition, results of operations or cash flow.

         The countries in which the company owns assets and operates stores are
         politically stable. However the company is exposed to market risk from
         potential changes in interest rates and foreign exchange rates. The
         company regularly evaluates these risks and has taken the following
         measures to mitigate these risks: the company's foreign exchange risk
         management objectives are to stabilize cash flow from the effects of
         foreign currency fluctuation; the company will, whenever practical,
         offset local investments in foreign currencies with borrowings
         denominated in the same currencies; the company also enters into
         foreign exchange contracts or purchase options to eliminate specific
         transaction risk.

         The company purchases forward exchange contracts to minimize potential
         foreign currency exchange risk related to its import merchandise
         purchase program. These forward exchange contracts are designated as
         foreign currency cash flow hedges, as defined by SFAS No. 133, and are
         effective as hedges.




                                        7


<PAGE>


                       TOYS "R" US, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                (Unaudited)
          ==========================================================



         Changes in the effective portion of the fair value of these forward
         exchange contracts are included in other comprehensive income until the
         hedged transactions are completed. Once the hedged transaction is
         completed, the unrealized gain or loss on the forward contract is
         reclassified from accumulated other comprehensive income to earnings.
         The company had not realized any material gain or loss related to these
         transactions for either the second quarter or the six months ended
         August 4, 2001.

         All forward exchange contracts that were designated as cash flow hedges
         as of August 4, 2001 will mature by the end of fiscal 2001. The related
         unrealized gain included in other comprehensive income at August 4,
         2001 was not material to the company's consolidated financial
         condition.

         The company continues to hedge certain intercompany receivables and
         payables by entering into forward exchange contracts. Gains and losses
         on these contracts are largely offset by the gains and losses on the
         underlying hedged items. These forward exchange contracts have not been
         designated for hedge accounting under SFAS No. 133.

         On July 19, 2001, the company entered into interest rate swap
         agreements on its $500 million outstanding 7.625% notes, due August 1,
         2011, and its $250 million outstanding 6.875% notes, due August 1,
         2006. Under these agreements, the company will pay interest at a
         variable rate in exchange for fixed rate payments, effectively
         transforming the debentures to floating rate obligations. This swap is
         designated as a perfectly effective fair value hedge, as defined by
         SFAS No. 133. Changes in the fair value of the interest rate swap
         perfectly offset changes in the fair value of the fixed rate debt due
         to changes in market interest rates. As such, there was no ineffective
         portion to the hedge recognized in earnings during the period.

         On February 13, 2001, the company borrowed 500 million EURO through the
         public issuance of a EURO bond bearing interest at 6.375% per annum.
         The obligation was swapped into a $466 million fixed rate obligation
         with an effective rate of 7.43% per annum with interest payments due
         annually and principal due February 13, 2004. This cross currency swap
         is designated as a cash flow hedge, as defined by SFAS No. 133, and is
         effective as a hedge.

         The company entered into a Swiss franc floating rate loan with a
         financial institution in January 1999, due January 2004. The company
         also entered into a contract to swap US dollars to Swiss francs, within
         exact terms of the loan. This cross currency swap has been designated
         as a foreign currency fair value hedge, as defined by SFAS No. 133, and
         is effective as a hedge.









                                        8
<PAGE>
<TABLE>
                       TOYS "R" US, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)
              ==========================================================



11.      Segments
         Information related to the various company segments is as follows:
         (In millions)


                                       13 Weeks Ended           26 Weeks Ended
                                    --------------------   -------------------
                                    August 4,   July 29,   August 4,   July 29,
                                      2001      2000           2001       2000
                                   -------    -------      -------     --------
<S>                                  <C>        <C>          <C>          <C>

Net sales
   Toys "R" Us - USA ............     $ 1,226    $ 1,238    $ 2,453    $ 2,480
   Toys "R" Us - International ..         316        321        601        626
   Toys "R" Us - Japan ..........        --         --         --          277
   Babies "R" Us ................         341        311        711        638
   Toysrus.com ..................          35          9         64         17
   Kids "R" Us ..................         103        115        253        275
------------------------------------------------------------------------------
Total ...........................     $ 2,021    $ 1,994    $ 4,082    $ 4,313
-------------------------------------------------------------------------------

Operating (loss) / earnings
   Toys "R" Us - USA ............     $    20    $    43    $    36    $    87
   Toys "R" Us - International ..          --          2        (12)       (11)
   Toys "R" Us - Japan, net of
       minority interest .........         --         --         --          8
   Babies "R" Us ................          31         27         71         59
   Toysrus.com, net of minority interest  (18)       (20)       (42)       (34)
   Other ..............................   (49)       (25)       (67)       (35)
                                        ---------------------------------------
Operating (loss) / earnings ..........    (16)        27        (14)        74

   Interest expense, net ...........      (30)       (23)       (60)       (46)
   Gain from IPO of Toys "R" Us - Japan    --         --         --        315
-------------------------------------------------------------------------------
(Loss) / earnings before income taxes  $  (46)   $     4    $   (74)   $   343
-------------------------------------------------------------------------------
<FN>
</FN>
</TABLE>


         Included in the category classified as "Other" are the operating
         results of the Kids "R" Us division and equity in the net earnings of
         Toys "R" Us - Japan, as well as other corporate related items.

12.      Restructuring and other charges
         In 1998, the company recorded restructuring and other non-recurring
         charges of $698 ($508 net of tax benefits) to strategically reposition
         its worldwide business. See the company's annual report for the year
         ended February 3, 2001 for details on these charges. Also, see the
         section "Management's Discussion and Analysis of Results of Operations
         and Financial Condition" in this report for an update on the
         initiatives and the status of related reserves.





                                        9


<PAGE>


          MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
                             AND FINANCIAL CONDITION
        ==================================================================

Results of Operations
Net sales were $2.0 billion for both the second quarter of 2001 and the second
quarter of 2000. For the first six months of 2001, our net sales were $4.1
billion versus $4.3 billion for the comparable period of 2000. Foreign currency
exchange had an unfavorable impact on net sales of approximately $22 million for
the second quarter of 2001 and $45 million for the first six months of 2001. In
addition, the net sales of Toys - Japan are included in our net sales in the
first quarter of 2000 and excluded from our net sales thereafter. Therefore, on
a comparable basis, our net sales increased 3% for the second quarter and 2% for
the first six months of 2001 if both net sales of Toys - Japan and the negative
impact of foreign currency translation are excluded.

Total enterprise sales include sales by all stores, whether operated by the
company, by franchisees or under joint-venture agreements. Total enterprise
sales were $2.3 billion for the quarter ended August 4, 2001 and July 29, 2000,
respectively, and $4.8 billion and $4.7 billion for the six months ended August
4, 2001 and July 29, 2000, respectively.

Our consolidated comparable store sales, in local currencies, were flat for the
second quarter of 2001 and decreased 1% for the first six months of 2001
compared with the same periods in 2000. Comparable store sales for the Toys "R"
Us - USA division were flat for the second quarter of 2001 and decreased 1% for
the first six months of 2001. We are retrofitting approximately 250 U.S.A. toy
stores to our Mission Possible format during fiscal 2001 and will have up to 70
stores under construction at any point in time through the end of the third
quarter. Our Mission Possible format includes an enhanced store layout and
improved customer service designed to create a more dynamic selling environment.
The disruption caused by this construction, as well as a soft retail
environment, negatively impacted sales during the first six months of fiscal
2001. International comparable toy store sales, on a local currency basis,
increased 4% for the second quarter of 2001 and 2% for the six months ended
August 4, 2001. This increase was partially driven by our toy stores in the
United Kingdom which reported a double-digit comparable store sales gain for the
second quarter of 2001, while the rest of our international markets reported low
to mid-single digit gains and declines. Many of the initiatives underway in our
U.S.A. toy stores are also being implemented in our international stores,
including improvements in merchandise content and presentation as well as
customer service programs. Our Babies "R" Us division reported low-single digit
comparable store sales increases for both the second quarter and first six
months of this year despite cycling double digit comparable store sales growth
in 2000. Our Toysrus.com subsidiary reported net sales of $35 million and $64
million for the second quarter and the first six months of 2001, respectively,
up considerably from $9 million and $17 million for the same periods last year.

Consolidated gross margin, as a percentage of sales, improved 80 basis points to
32.7% for the second quarter of 2001 compared with the second quarter of last
year. On a year to date basis, excluding the impact of Toys - Japan in the prior
period, our consolidated gross margin increased 90 basis points to 32.5% from
the same period last year. These increases were driven primarily by the
expansion of our



                                       10

<PAGE>

        MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
                             AND FINANCIAL CONDITION
          ==================================================================
                                   (continued)

exclusive merchandise programs. Gross margin for the Toys "R" Us - USA division
increased 150 basis points to 32.2% for the second quarter and also increased
130 basis points to 31.6% on a year to date basis. Gross margin for the
International division, excluding the impact of Toys - Japan in the prior
period, decreased 40 basis points to 33.8% for the second quarter and remained
flat at 33.3% on a year to date basis. Gross margin at our Babies "R" Us
division grew 100 basis points to 34.1% for the second quarter and 110 basis
points to 34.2% for the first six months of 2001.

Total selling, general and administrative expenses (SG&A), as a percentage of
sales, increased 240 basis points to 29.8% for the second quarter of 2001
compared with the second quarter of last year. On a year to date basis,
excluding the impact of Toys - Japan in the prior period, our SG&A increased 260
basis points to 29.3% from the same period last year. SG&A for Toys "R" Us -
USA, increased 300 basis points to 26.6% for the second quarter and also
increased 300 basis points to 26.2% on a year to date basis, compared with the
same periods last year. These increases are primarily due to the investments we
are making in our business, such as Mission Possible and certain customer
focused initiatives. SG&A for the International division, excluding the impact
of Toys - Japan in the prior period, remained flat for the second quarter and
six months ended August 4, 2001, as compared with the same period last year.
SG&A for the Babies "R" Us division increased 60 basis points to 23.7% for the
second quarter 2001 and increased 40 basis points to 23.0% on a year to date
basis, compared with the same periods last year. This increase is primarily due
to increased payroll costs related to supporting our customer focused
initiatives.

Depreciation and amortization increased by $7 million for the first six months
2001 from the first six months of 2000, primarily due to the Mission Possible
store remodeling program, continued new store expansion and strategic
investments to improve management information systems.

Net interest expense increased by $14 million for the first six months of 2001
from 2000. This increase is mainly attributable to the Mission Possible store
remodeling program, the funding of our stock repurchase program and the funding
of our Toysrus.com subsidiary.

Foreign currency exchange did not have a significant impact on net earnings for
either the second quarter or first six months of 2001.

Restructuring and Other Charges
During 1998, we announced strategic initiatives to reposition our worldwide
business and other charges including the customer-focused reformatting of our
toy stores into the Mission Possible format, as well as the restructuring of our
International operations, which resulted in a charge of $353 million ($279
million net of tax benefits, or $1.05 per share). Details on the components of
our strategic initiatives and other charges are described in our annual report
for the year ended February 3, 2001. The reserve balances and subsequent
utilization are as follows:

                                       11


<PAGE>
<TABLE>
<CAPTION>

          MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
                           AND FINANCIAL CONDITION
      ==================================================================
                                   (continued)

                                    Reserve Balance              Reserve Balance
Description                            @ 2/03/01      Utilized       @ 8/04/01
-------------------------------------------------------------------------------
<S>                                     <C>             <C>               <C>
Closings/downsizings:
    Lease commitments                   $49            $ 7             $ 42
    Severance and other closing costs     8              4                4
-------------------------------------------------------------------------------
Total restructuring                     $57           $ 11              $46
-------------------------------------------------------------------------------
Provisions for legal settlements        $11            $ 2              $ 9
-------------------------------------------------------------------------------

<FN>
</FN>
</TABLE>

In 1998, we also announced markdowns and other charges of $345 million ($229
million net of tax benefits, or $.86 per share), of which $6 million of store
closure markdowns remain at August 4, 2001.

We believe all reserves are reasonable estimates of what is required to complete
our restructuring initiatives.























                                       12


<PAGE>


        MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
                             AND FINANCIAL CONDITION
      ==================================================================
                                   (continued)


Financial Condition
By February 2, 2002, we expect to operate approximately 1,608 stores, consisting
of: 703 toy stores in the United States, of which approximately 415 will be in
the Mission Possible format; 512 International toy stores (including 227
franchise and joint venture stores); 184 Kids "R" Us children's clothing stores;
167 Babies "R" Us stores and 42 Imaginarium stores. We expect to have all U.S.
toy stores operating in the Mission Possible format by the 2002 Holiday season.
In addition, we also sell merchandise through our internet sites at
www.toysrus.com, www.babiesrus.com and www.imaginarium.com and through mail
order catalogs.

We maintain a $400 million unsecured committed revolving credit facility and a
$1 billion multi-currency unsecured committed revolving credit facility expiring
in December 2001 and 2002, respectively, from a syndicate of financial
institutions. Cash requirements for operations, capital expenditures and lease
commitments will be met primarily through operating activities, issuance of
commercial paper and/or additional medium-term financing.

On July 19, 2001, we issued $500 million notes bearing interest at 7.625% per
annum maturing on August 1, 2011 and $250 million notes bearing interest at
6.875% per annum maturing on August 1, 2006. Simultaneously, we entered into
interest rate swap agreements. Interest on the $500 million notes will accrue at
the rate of LIBOR plus 1.5120% per annum and interest on the $250 million notes
will accrue at the rate of LIBOR plus 1.1515% per annum. Interest is payable on
both notes semi-annually on February 1 and August 1 of each year, commencing on
February 1, 2002.

On February 13, 2001, we borrowed 500 million EURO through the public issuance
of a EURO bond bearing interest at 6.375% per annum. This obligation was swapped
into a $466 million fixed rate obligation at an effective rate of 7.43% per
annum with interest payments due annually and principal due on February 13,
2004.

On July 21, 2000, we borrowed the yen equivalent of $147 million, which is
repayable in semi-annual installments of principal and interest, with the final
installment due on August 17, 2005. The effective cost of this borrowing is
2.32% and is secured by expected future cash flows from license fees due from
Toys - Japan.

Net borrowings increased $701 million at August 4, 2001 from July 29, 2000. This
increase is due to the remodeling of the toy stores to the Mission Possible
format, increased share repurchases and inventory levels, and the funding of
Toysrus.com.




                                       13

<PAGE>

          MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
                             AND FINANCIAL CONDITION
        ==================================================================
                                   (continued)

For 2001, capital requirements for our expansion plans mentioned above, as well
as other capital requirements are estimated to be approximately $600 million.

We have not purchased any shares through our share repurchase program during the
first six months of fiscal 2001. We purchased 31 million shares of common stock
for $449 million during the first six months of fiscal 2000.

Weighted-average diluted shares outstanding decreased to 208 million during the
first six months of fiscal 2001 from 224.6 million during the same period in
fiscal 2000, due primarily to the impact of shares repurchased under our share
repurchase program.

Toysrus.com has a 10-year strategic alliance with Amazon.com to create a
co-branded toy and video games on-line store, which was launched in the third
quarter of 2000, a co-branded baby products on-line store, which was launched in
May 2001, and a co-branded creative and learning products on-line store, which
was launched in July 2001. Under this alliance, Toysrus.com and Amazon.com are
responsible for specific aspects of the on-line stores. Toysrus.com is
responsible for merchandising and content for the co-branded stores. Toysrus.com
also identifies, buys, owns and manages the inventory. Amazon.com handles web
site development, order fulfillment, customer service, and the housing of
Toysrus.com's inventory in Amazon.com's U.S. distribution centers.

As a result of the transition to the co-branded site in fiscal 2000, the
company's Toysrus.com subsidiary recorded non-recurring costs and charges,
before minority interest, totaling approximately $118 million, $10 million of
which were included in cost of sales and $108 million of which were included in
selling, general and administrative expenses, primarily relating to the closure
of three distribution centers, the write-off of web site assets, as well as
other costs associated with migrating data and merchandise to the new site and
facilities. At August 4, 2001, Toysrus.com has remaining reserves of
approximately $72 million, primarily related to exit costs for distribution
centers. Management believes these reserves to be reasonable estimates of what
is required to complete these initiatives.

We recorded a pre-tax gain of $315 million in the first quarter of 2000,
resulting from the initial public offering of shares of Toys - Japan. As a
result of this transaction, our ownership percentage in the common stock of Toys
- Japan was reduced from 80% to 48%. Toys - Japan is a licensee of ours.








                                       14

<PAGE>

         MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
                             AND FINANCIAL CONDITION
           ==================================================================
                                   (continued)

Recent Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board issued SFAS No.
141, "Business Combinations." SFAS No. 141 eliminates the
pooling-of-interests method of accounting for business combinations
initiated after July 1, 2001, and changes the criteria for recognizing
intangible assets apart from goodwill. SFAS No. 141 requires any
business combination initiated after June 30, 2001 to be accounted for
by the purchase method of accounting.

In June 2001, the Financial Accounting Standards Board issued SFAS No. 142,
"Goodwill and Other Intangible Assets". SFAS No. 142 stipulates that goodwill
and indefinite lived intangible assets will no longer be amortized, but instead
will be periodically reviewed for impairment. The amortization provisions of
SFAS No. 142 apply to goodwill and intangible assets acquired after June 30,
2001. For goodwill and intangible assets acquired prior to July 1, 2001, the
provisions of this statement will be effective at the beginning of our fiscal
year 2002, when we will be required to adopt SFAS No. 142. Application of the
nonamortization provisions of SFAS No. 142 is expected to result in an increase
in net income of $8 million ($0.04 per share) per year. The adoption of this
SFAS 142 is not expected to have a material impact on our consolidated financial
condition, results of operations or cash flows.

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities," as amended,
which was adopted by us effective February 4, 2001. This standard requires that
all derivatives be recorded in the balance sheet at fair value and that all
changes in fair value be recognized currently in earnings unless specific hedge
criteria are met. The cumulative effect of adoption was not material to our
consolidated financial condition, results of operations or cash flow.

The countries in which we own assets and operate stores are politically stable.
However, we are exposed to market risk from potential changes in interest rates
and foreign exchange rates. We regularly evaluate these risks and have taken the
following measures to mitigate these risks: our foreign exchange risk management
objectives are to stabilize cash flow from the effects of foreign currency
fluctuation; we will, whenever practical, offset local investments in foreign
currencies with borrowings denominated in the same currencies; we also enter
into foreign exchange contracts or purchase options to eliminate specific
transaction risk.

We purchases forward exchange contracts to minimize potential foreign currency
exchange risk related to our import merchandise purchase program. These forward
exchange contracts are designated as foreign currency cash flow hedges, as
defined by SFAS No. 133, and are effective as hedges.




                                       15
<PAGE>

         MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
                             AND FINANCIAL CONDITION
        ==================================================================
                                   (continued)


Changes in the effective portion of the fair value of these forward exchange
contracts are included in other comprehensive income until the hedged
transactions are completed. Once the hedged transaction is completed, the
unrealized gain or loss on the forward contract is reclassified from accumulated
other comprehensive income to earnings. We had not realized any material gain or
loss related to these transactions for either the second quarter or the six
months ended August 4, 2001.

All forward exchange contracts that were designated as cash flow hedges as of
August 4, 2001 will mature by the end of fiscal 2001. The related unrealized
gain included in other comprehensive income at August 4, 2001 was not material
to our consolidated financial condition.

We continue to hedge certain intercompany receivables and payables by entering
into forward exchange contracts. Gains and losses on these contracts are largely
offset by the gains and losses on the underlying hedged items. These forward
exchange contracts have not been designated for hedge accounting under SFAS No.
133.

On July 19, 2001, we entered into interest rate swap agreements on its $500
million outstanding 7.625% notes, due August 1, 2011, and its $250 million
outstanding 6.875% notes, due August 1, 2006. Under these agreements, we will
pay interest at a variable rate in exchange for fixed rate payments, effectively
transforming the debentures to floating rate obligations. This swap is
designated as a perfectly effective fair value hedge, as defined by SFAS No.
133. Changes in the fair value of the interest rate swap perfectly offset
changes in the fair value of the fixed rate debt due to changes in market
interest rates. As such, there was no ineffective portion to the hedge
recognized in earnings during the period.

On February 13, 2001, we borrowed 500 million EURO through the public issuance
of a EURO bond bearing interest at 6.375% per annum. The obligation was swapped
into a $466 million fixed rate obligation with an effective rate of 7.43% per
annum with interest payments due annually and principal due February 13, 2004.
This cross currency swap is designated as a cash flow hedge, as defined by SFAS
No. 133, and is effective as a hedge.

We entered into a Swiss franc floating rate loan with a financial institution in
January 1999, due January 2004. We also entered into a contract to swap US
dollars to Swiss francs, with in the exact terms of the original loan. This
cross currency swap has been designated as a foreign currency fair value hedge,
as defined by SFAS No. 133, and is effective as a hedge.







                                       16
<PAGE>

          MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
                             AND FINANCIAL CONDITION
          ==================================================================
                                   (continued)


Forward-Looking Statements
This Form 10-Q contains "forward-looking" statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, which are intended to be covered by
the safe harbors created thereby. We may also make forward-looking statements in
our other documents filed with the Securities and Exchange Commission, our
annual report to shareholders, our proxy statement and in our press releases.
All statements that are not historical facts, including statements about our
beliefs or expectations, are forward-looking statements. These statements
involve risks and uncertainties that exist in our business that could render
actual outcomes and results materially different than predicted. Our
forward-looking statements are based on assumptions about many factors,
including, but not limited to, ongoing competitive pressures in the retail
industry, changes in consumer spending, general economic conditions in the
United States and other jurisdictions in which we conduct business (such as
interest rates, inflation and consumer confidence) and normal business
uncertainty. While we believe that our assumptions are reasonable, we caution
that it is impossible to predict the actual outcome of numerous factors. The
forward-looking statements speak only as of the date they are made, and we
undertake no obligation to update these statements. Our actual results may
differ materially from those contained in any forward-looking statement.























                                       17
<PAGE>

                          PART II - OTHER INFORMATION


Item 4.           Submission of Matters to a Vote of Security Holders

                  At our Annual Meeting on June 6, 2001 all nominees for
director were elected to a one year term.

                  The following table sets forth the vote of the shareholders
with respect to the election of directors.

                                       Votes For                Votes Withheld
RoAnn Costin .......................   156,513,556              1,878,590
John H. Eyler, Jr ...................  156,565,892              1,826,254
Michael Goldstein .................... 155,873,823              2,518,323
Calvin Hill .........................  156,565,374              1,826,772
Nancy Karch ...........................156,565,325              1,826,821
Shirley Strum Kenny ...................156,564,886              1,827,260
Charles Lazarus .......................156,557,476              1,834,667
Norman S. Matthews ....................156,564,806              1,827,340
Arthur B. Newman ......................156,566,042              1,826,104

In addition,  the shareholders  voted upon and approved our 2001 Stock
Option and Performance Plan. The vote on the proposal was as follows:

Votes For         Votes Against           Abstentions                Non-Votes
---------         -------------           -----------                ---------
89,922,369          67,055,773              1,413,984               39,129,914

Item 6.           Exhibits and Reports on Form 8-K

                  (a)      Exhibits:
                           None

                  (b)      Report on Form 8-K

                           On July 13, 2001, we announced plans to offer U.S.
                           dollar notes through a private placement with
                           institutional investors.

                           On July 24, 2001, we successfully closed our
                           previously announced plans to offer U.S. dollar notes
                           through a private placement with institutional
                           investors.




                                       18

<PAGE>


                                   SIGNATURES



         Pursuant to the requirements of the Securities Exchange Act of 1934,
         the registrant has duly caused this report to be signed on its behalf
         by the undersigned thereunto duly authorized.










         Date:  September 14, 2001        Toys "R" Us, Inc.
                                          -------------------------------------
                                          (Registrant)






                                           s/ Louis Lipschitz
                                           ------------------------------------
                                          (Signature)
                                          Louis Lipschitz
                                          Executive Vice President and
                                          Chief Financial Officer
















                                       19