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



                   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 July 31, 1999




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

                     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

         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 [ ]

         244,772,683 shares of the registrant's Common Stock were outstanding on
         August 28, 1999.



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


<PAGE>











                                  INDEX



                                                                           PAGE

PART I - FINANCIAL INFORMATION


         Item 1. Financial Statements


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


                  Condensed Consolidated Statements of Earnings................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.......................7


PART II - OTHER INFORMATION...................................................13


SIGNATURES....................................................................15




                                                1


<PAGE>
<TABLE>





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

<S>
ASSETS                                        July 31,   August 1,   January 30,
                                                1999       1998          1999
                                             ----------  ----------  ----------
                                                <C>        <C>           <C>

Current Assets:
 Cash and cash equivalents                  $   259     $   273       $   410
 Accounts and other receivables                 172         157           204
 Merchandise inventories                      2,304       2,745         1,902
 Prepaid expenses and other current assets      108          76            81
                                            ---------   ---------    ----------
   Total current assets                       2,843       3,251         2,597

Property and equipment, net and other assets  5,026       4,765         4,955

Goodwill, net                                   342         351           347
                                            ==========   =========    =========
                                            $ 8,211       8,367       $ 7,899
                                            ==========   =========    =========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
 Short-term borrowings                      $   802    $   1,255     $   156
 Accounts payable                             1,413        1,312       1,415
 Accrued expenses and
 other current liabilities                      523          404         696
 Income taxes payable                           137          145         224
                                            ----------   ----------  ----------
    Total current liabilities                 2,875        3,116       2,491

Long-term debt                                1,221          787       1,222
Deferred income taxes                           333          227         333
Other liabilities                               222          161         229
Stockholders' equity                          3,560        4,076       3,624
                                            ==========   ==========  ==========
                                            $ 8,211      $ 8,367     $ 7,899
                                            ==========   ==========  ==========
<FN>

                See notes to condensed  consolidated  financial statements.


</FN>
</TABLE>





                                               2


<PAGE>
<TABLE>






                         TOYS "R" US, INC. AND SUBSIDIARIES
                   CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
                                      (Unaudited)
               ===================================================
                         (In millions except per share data)
                                       13 Weeks Ended         26 Weeks Ended
                                   ---------------------   -------------------
<CAPTION>

                                         July 31, August 1,  July 31,  August 1,
                                           1999      1998      1999        1998
                                       ---------   ---------  -------- --------

<S>                                        <C>        <C>        <C>      <C>
Net sales                             $   2,204  $   2,020  $  4,370  $   4,063
                                         -------     -------  ------     ------

Costs and expenses:
 Cost of sales                            1,522      1,390     3,027      2,807
 Selling, advertising,
 general & administrative                   574        520     1,126      1,038
 Depreciation and amortization               66         61       132        122
 Interest expense - net                      23         27        39         44
                                         --------  --------   -------    ------
                                          2,185      1,998     4,324      4,011
                                         --------  --------   -------   -------



Earnings before taxes on income              19         22        46         52
Taxes on income                               7          8        17         19
                                         =======    =======     ======    =====
Net earnings                             $   12     $   14     $  29     $   33
                                         =======    =======     ======    =====



Basic earnings per share                 $  .05     $  .05     $  .12   $   .12
                                         =======    ========  ========   =======

Weighted average
basic shares outstanding                 246.9       273.0      248.1    276.6
                                         =======    =======    =======   =======

Diluted earnings per share             $    .05    $    .05   $    .12  $   .12
                                         =======    =======    =======   =======
Weighted average
diluted shares outstanding               248.8       273.6      249.1    278.0
                                        =======    =======    =======   =======
<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
                                                         ----------------
                                                     July 31,         August 1,
                                                       1999             1998
                                                     --------         ---------
<S>                                                     <C>             <C>

Cash flows from operating activities:
Net earnings                                        $   29             $     33
Adjustments to reconcile net earnings
to net cash used in operating activities:
  Depreciation and amortization                        132                  122
  Deferred income taxes                                  1                    8
  Changes in operating assets and liabilities:
   Merchandise inventories                            (411)                (281)
   Accounts payable and other operating liabilities   (269)                (310)
   Other operating assets                              (19)                  (6)
                                                    ---------          ---------
  Net cash used in operating activities               (537)                (434)
                                                    ---------          ---------
Cash flows used in investing activities:
Capital expenditures, net                             (198)                (180)
                                                    ---------          ---------
Cash flows from financing activities:
Short-term borrowings, net                              647               1,121
Long-term borrowings                                      0                  31
Long-term debt repayment                                 (5)                (79)
Exercise of stock options                                17                  15
Share repurchase program                               (104)               (420)
                                                     --------          --------
  Net cash provided by financing activities             555                 668

Effect of exchange rate changes
on cash and cash equivalents                             29                   5

Cash and cash equivalents:
(Decrease)/increase during period                      (151)                 59
Beginning of period                                     410                  214
                                                    =========          =========
End of period                                       $   259             $    273
                                                    =========          =========
Supplemental disclosures of cash flow information:
Income tax payments                                 $   104             $     95
                                                    =========          =========


Interest paid                                        $   41             $     49
                                                    =========          =========
<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)
            ==========================================================
                                  (In millions)


1.       Interim reporting
         The  interim  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 January 30,
         1999.


2.       Commercial paper
         Commercial  paper of $368 million is  classified  as long-term  debt at
         July 31, 1999 and January 30, 1999 as the Company  maintains  long-term
         committed credit  agreements to support these borrowings and intends to
         refinance  them  on  a  long-term   basis  through   commercial   paper
         borrowings.  Additionally,  commercial  paper of $487  million and $752
         million are  included  in  short-term  borrowings  at July 31, 1999 and
         August 1, 1998, respectively.


3.       Comprehensive income
         Comprehensive income/(loss) amounted to $5 million and ($2) million for
         the  second   quarter   ended  July  31,   1999  and  August  1,  1998,
         respectively,   as  a  result  of  the  change  in   foreign   currency
         translation.  For the 26 weeks  ended July 31, 1999 and August 1, 1998,
         comprehensive   income   amounted  to  $23  million  and  $46  million,
         respectively,   as  a  result  of  the  change  in   foreign   currency
         translation.


4.       Segments
         The Company's  reportable  segments are Toys "R" Us - United States and
         Toys `R" Us -  International.  Divisions that do not meet  quantitative
         reportable thresholds are included in the category classified as Other,
         which is comprised  of the Kids "R" Us and Babies "R" Us divisions  and
         the  toysrus.com  subsidiary.  Information  related to  segments  is as
         follows:








                                     5

<PAGE>
<TABLE>


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



 -------------------------------------------------------------------------------

<CAPTION>
                                     13 Weeks Ended       26 Weeks Ended
                                  ----------------------------------------------
                                  July 31,   August 1,    July 31,    August 1,
                                    1999        1998        1999        1998
<S>                                 <C>         <C>         <C>          <C>

------------------------------  ---------   ---------    ---------    ---------
Net sales
  Toys "R" Us - USA              $ 1,236     $ 1,188      $ 2,420    $  2,353
  Toys "R" Us - International        578         500        1,101         982
  Other                              390         332          849         728
-------------------------------  ---------  ---------    ---------    ---------
Total                            $ 2,204     $ 2,020      $ 4,370    $  4,063
-------------------------------  ---------  ---------    ---------    ---------
Operating earnings/(loss)
  Toys "R" Us - USA              $    45     $    62      $    86    $    110
  Toys "R" Us - International         (1)         (9)         (21)        (28)
  Other                                2          (1)          29          19
  General corporate expenses          (4)         (3)          (9)         (5)
  Interest expense, net              (23)        (27)         (39)        (44)
--------------------------------  --------- ---------    ---------    ---------
Earnings before taxes on income  $    19     $    22      $    46    $     52
--------------------------------  --------- ---------    ----------   ---------

<FN>


      5.       Subsequent Event
               On August 20, 1999, the Company acquired all of the capital stock
               of Imaginarium Toy Centers, Inc., a leading educational specialty
               retailer  with 41  stores in 13  states,  for  approximately  $45
               million of cash and the  assumption of certain  liabilities.  The
               acquisition  will be accounted  for using the purchase  method of
               accounting  and the  results of  Imaginarium  operations  will be
               combined with those of the Company from the date of acquisition.


     6.       Other Matters
              See Part II - Item I - Legal Proceedings.









</FN>
</TABLE>




                                          6

<PAGE>


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

Results of Operations
Net sales  were $2.2  billion  and $4.4  billion,  respectively,  for the second
quarter and six months ended July 31, 1999, an increase of $184  million,  or 9%
from the quarter  ended  August 1, 1998,  and $307  million,  or 8% from the six
months ended August 1, 1998. The sales  increases  were primarily  driven by the
Company's  growth  in the  Babies  "R" Us  division  as  well  as  increases  in
comparable  store sales. In addition,  the net sales growth was partially offset
by the  closing  of 29  under-performing  stores  (see  Restructuring  and Other
Charges).

On a consolidated basis, comparable store sales, in local currencies,  increased
by 5% for the second  quarter of 1999,  and 3% for the six months ended July 31,
1999, as compared with the same periods in 1998.  Comparable store sales for the
Toys "R" Us - USA division increased by 4% for the second quarter of 1999 and 3%
for the first six months of 1999,  as  compared  with the same  periods in 1998.
These sales gains were driven by  stronger  merchandising  trends  offset by the
impact of toy stores undergoing C-3 renovations.  Internationally, the Company's
overall comparable toy store sales, on a local currency basis,  increased 6% for
the second  quarter of 1999,  and 3% for the six months ended July 31, 1999,  as
compared with the same periods in 1998.  International sales were strong in most
categories,  in particular,  in the juvenile  category,  which reflects  growing
customer  acceptance of expanded  juvenile  shops.  The Company's  Babies "R" Us
division had a comparable store sales increase in the high single digits for the
second  quarter of 1999,  and in the  low-teens  for the six  months  ended July
31,1999,  driven by an  increase  in  customer  counts as well as an increase in
average sale per customer.  The Company's  Kids "R" Us division  experienced  an
increase  in  comparable  store  sales in the low  single  digits for the second
quarter  of 1999,  which were flat for the six months  ended July 31,  1999,  as
compared with the same periods in 1998.

Cost of sales, as a percentage of sales, increased by approximately 0.3% for the
second  quarter  of 1999,  and  0.2% for the six  months  ended  July 31,  1999,
respectively,  as  compared  with the same  periods in 1998.  This  increase  is
partially  due to  additional  promotional  activity  as part  of the  Company's
initiative  to improve  its price value  image.  Cost of sales for Toys "R" Us -
USA, as a percentage of sales, increased by 0.3% for the second quarter of 1999,
and 0.4% for the six months ended July 31, 1999, respectively,  as compared with
the same  periods  in 1998.  Cost of sales  for the Toys "R" Us -  International
division, as a percentage of sales,  increased by 1.1% for the second quarter of
1999, and 0.8% for the six months ended July 31, 1999, respectively, as compared
with the same periods in 1998,  due to an increase in  markdowns.  The Company's
other  divisions  experienced  a  combined  decrease  in  cost  of  sales,  as a
percentage of sales,  1.07% for the second quarter of 1999, and 0.6% for the six
months ended July,  1999,  as compared  with the same periods in 1998,  due to a
favorable change in the sales mix this year.







                                          7


<PAGE>


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

Selling, advertising, general and administrative expenses (SG&A) as a percentage
of sales  increased by 0.2% for both the second  quarter of 1999 and for the six
months ended July 31, 1999,  respectively,  as compared with the same periods in
1998.  This  increase  is  primarily  due  to  planned   spending  on  strategic
investments, as well as the implementation of a new customer focused initiative.
SG&A for Toys "R" Us - USA,  as a  percentage  of sales,  increased  by 0.8% and
0.4%, respectively, for the second quarter of 1999 and six months ended July 31,
1999,  as compared  with the same  periods in 1998.  SG&A for the  International
division, as a percentage of sales, decreased 2.3% and 1.4%,  respectively,  for
the second  quarter of 1999 and the six months ended July 31, 1999, as compared
with the same  periods in 1998.  During the same  period,  the  Company's  other
divisions reported a combined 0.7% and 0.5% decrease in SG&A, respectively,  for
the  second  quarter  of 1999  and the six  months  ended  July 31,  1999,  as a
percentage of sales.

Depreciation  and  amortization   increased  by  $5  million  and  $10  million,
respectively,  for the second  quarter of 1999 and the six months ended July 31,
1999,  as compared  with the same  periods in 1998 as a result of the  Company's
continued  store  expansion  and  strategic  investments  to improve  management
information systems.

Net  interest  expense in 1998  included  a charge of $4 million  related to the
early  extinguishment  of long-term  debt.  Excluding this charge,  net interest
expense was $23 million  for both the second  quarter of 1999 and 1998.  For the
first six  months of 1999,  interest  expense  was $1  million  less than  1998,
excluding  the  charge,  due  primarily  to the mix of  currencies  in which the
Company borrowed.

Foreign  currency  exchange  did not  have a  material  effect  on  sales or net
earnings for the second quarter and the six months ended July 31, 1999.

Restructuring and Other Charges
During  1998 the Company  announced  strategic  initiatives  to  reposition  its
worldwide   business  and  other   charges,   including   the   customer-focused
reformatting  of its  toy  stores  into  the  new  C-3  format,  as  well as the
restructuring  of its  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 the  Company's  strategic  initiatives  and other charges are
described in the  Company's  Annual  Report for the year ended January 30, 1999;
the reserve balances as at that date and subsequent utilization are as follows:


<TABLE>

<CAPTION>
                                  Reserve Balance                Reserve Balance
Description                         @ 1/30/99        Utilized      @ 7/31/99
--------------------------------------------------------------------------------
<S>                                   <C>             <C>            <C>

Closings/Downsizings:
 Lease commitments                    $81             $ 7            $74
 Severance and other closing costs     25               7             18
 Other                                 24               -             24
--------------------------------------------------------------------------------
Total Restructuring                  $130             $14           $116
--------------------------------------------------------------------------------
Changes in accounting estimates and
  provisions for legal settlements    $39               4            $35
--------------------------------------------------------------------------------
<FN>

</FN>
</TABLE>
                                             8


<PAGE>

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

The Company has closed two Toys "R" Us toy stores and five Kids "R" Us stores in
the United States,  as well as 22 Toys "R" Us toy stores  internationally  since
the  recording  of the  charges.  In  addition,  the  Company  has closed  three
distribution  centers  and seven  area  offices  in the  United  States.  Unused
reserves are expected to be utilized in 1999,  with the  exception  of those
related to long-term lease commitments.

In 1998 the Company also  announced  markdowns and other charges of $345 million
($229 million net of tax benefits, or $.86 per share). Details on the components
of these charges are described in the Company's Annual Report for the year ended
January  30,  1999;  the  reserve  balances  as  at  that  date  and  subsequent
utilization are as follows:

<TABLE>
<CAPTION>

                                 Reserve Balance                 Reserve Balance
Description                         @ 1/30/99         Utilized    @ 7/31/99
--------------------------------------------------------------------------------
<S>                                    <C>              <C>          <C>

Markdowns:
 Clear excess inventory                $74             $ 53         $ 21
 Store closings                         27                3           24
Other                                    6                -            6
--------------------------------------------------------------------------------
Total Cost of Sales                   $107             $ 56         $ 51
--------------------------------------------------------------------------------
<FN>

Unused reserves are expected to be utilized in 1999.

Impact of Year 2000
Year 2000 issues are those related to the inability of certain  computer systems
to properly  recognize and process  date-sensitive  information  relative to the
year 2000 and beyond.  The  Company's  Year 2000  project,  which began in 1997,
includes four major elements,  which are outlined in the Company's Annual Report
for the year ended January 30, 1999.

The total  estimated cost to achieve year 2000 compliance is  approximately  $25
million,  which is being expensed as incurred.  These estimates exclude internal
labor and  related  costs.  Approximately  $20  million of these costs have been
incurred as of July 31, 1999 and all costs are being  funded  through cash flows
from operations. The Company has established contingency plans for possible year
2000 issues and will continue monitoring these plans.

The total  cost of the Year 2000  project  is not  expected  to have a  material
effect on the Company's  financial position or results of operations.  The costs
of conversion and the  completion  dates for the project are  management's  best
estimates.


</FN>
</TABLE>





                                     9


<PAGE>


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


Financial Condition
In 1999, the Company plans to open approximately 10 new toy stores in the United
States and is  currently in the process of  remodeling  many of its existing toy
stores in the United States to the new C-3 format.  The Company is also planning
to add  approximately 25 new  international  toy stores,  including 10 franchise
stores,  and  approximately  20 new Babies "R" Us stores in the United States in
1999.

The Company  continues to implement its C-3 Total  Solutions  Strategy  aimed at
developing  greater everyday  customer value in terms of price,  service and the
total  shopping  experience.  The C-3 store  format,  which  stands for Customer
friendly, Cost-effective and Concept for the future, includes wider aisles, more
feature opportunities and end-caps, shops and logical category adjacencies - all
designed to improve customer shopping  patterns and experience.  The sales floor
has been  expanded  by 20% with a  one-third  reduction  in the size of the back
room.  The Company has  substantially  completed,  with the exception of certain
graphics/signage  packages  expected in the third  quarter,  the  remodeling  of
approximately 80 toy stores to the new C-3 format during the second quarter. The
Company is planning to have about 170 stores  operating in the C-3 format by the
upcoming  holiday  season.  In  addition,  the Company  intends to complete  the
conversion of approximately  240 "front-end"  retrofits in 1999. These retrofits
include  high  potential  C-3  merchandising  modules  such as R-Zone  (expanded
electronics),  Celebration  Station (party  headquarters),  an enlarged seasonal
shop plus improved customer checkout and traffic flow. In year 2000, the Company
plans to complete approximately 325 additional C-3 remodels.

On August 26, 1999, Robert C. Nakasone resigned as the Company's Chief Executive
Officer and as a director. Also on that date Michael Goldstein,  Chairman of the
Board of Directors,  was named Chief Executive  Officer on an interim basis. Mr.
Goldstein  was Chief  Executive  Officer of the Company  from 1994 to 1998.  The
Company has begun the process of seeking a permanent Chief Executive Officer. In
connection with the  resignation of Mr. Nakasone as Chief Executive  Officer and
director,  the Company entered into a Separation and Release  Agreement with Mr.
Nakasone  providing  for cash  payments in the  aggregate  of  approximately  $5
million.  In addition,  the Agreement  provides for the immediate vesting of all
unvested  options  held  by Mr.  Nakasone  as well as the  prorated  vesting  of
unvested equity based awards on the second anniversary of the termination date.

The Company is  continuing  the  development  of its  internet  strategy and has
appointed  John  Barbour  as  President  and  Chief  Executive  Officer  of  its
toysrus.com  subsidiary.  The  Company  has  also  decided  not  to  pursue  its
internet-related partnership with Benchmark Capital.





                                          10

<PAGE>

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

On August 20, 1999, the Company acquired all of the capital stock of Imaginarium
Toy Centers,  Inc. for  approximately  $45 million in cash and the assumption of
certain  liabilities.  The Company believes this acquisition will accelerate its
strategy to  establish a leadership  position in the  learning  and  educational
category.  In  addition,  the Company  also  believes  Imaginarium  will provide
opportunities  for new  growth.  The  Company  plans  to  operate  the  existing
Imaginarium stores under the Imaginarium name.

For 1999,  capital  requirements  for the Company's  expansion  plans  mentioned
above, as well as capital  requirements for its recently  announced  toysrus.com
subsidiary, are estimated to be approximately $550 to $600 million.

The Company's  cash outflows from  operations  increased to $537 million for the
six months ended July 31, 1999 from $434 million for the six months ended August
1, 1998 primarily due to increases in  merchandise  inventories as well as lower
accrued expenses and other liabilities.

During the first six months of 1999, the Company  repurchased  approximately 5.5
million  shares of its common  stock  through its share  repurchase  program for
approximately  $104  million.  The Company has $226 million  remaining in its $1
billion share repurchase program announced in January 1998.

Cash requirements for operations,  capital  expenditures,  lease commitments and
the share repurchase program will be met primarily through operating activities,
borrowings  under  the  $1  billion  revolving  credit  facility,   issuance  of
commercial paper and bank borrowings by foreign subsidiaries.

Weighted-average  diluted shares  outstanding  decreased to 249.1 million during
the first six months ended July 31, 1999 from 278.0 million during the first six
months ended August 1, 1998,  due  primarily  to the shares  repurchased  by the
Company under its share repurchase program.


Recent Accounting Pronouncements
In June 1999,  the Financial Accounting Standards Board approved the deferral of
Statement No. 133 ("SFAS No. 133") - Accounting for Derivatives  Instruments and
Hedging  Activities,  which the  Company  is  required  to adopt in fiscal  year
beginning  February 2001. SFAS No. 133 requires that all derivative  instruments
be  recorded on the  balance  sheet at fair value.  Changes in the fair value of
derivatives are recorded each period in current earnings or other  comprehensive
income,  depending  on whether a  derivative  is  designated  as part of a hedge
transaction and the type of hedge  transaction.  The ineffective  portion of all
hedges will be  recognized in earnings.  While not expected to be material,  the
Company is in the process of  determining  the impact that the  adoption of SFAS
No. 133 will have on the consolidated financial position,  results of operations
and cash flows of the Company.




                                         11


<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.  The Company may also make  forward-looking
statements in other documents filed with the Securities and Exchange Commission,
its annual report to  shareholders,  its proxy  statement and in press releases.
All statements that are not historical  facts,  including  statements  about the
Company's  beliefs  or  expectations,   are  forward-looking   statements.  Such
statements   involve  risks  and  uncertainties  that  exist  in  the  Company's
operations  and  business  environment  that could  render  actual  outcomes and
results  materially  different  than  predicted.  The Company's  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 the Company conducts business (such as interest rates and
consumer confidence) and normal business uncertainty. While the Company believes
that its assumptions are reasonable at the time forward-looking  statements were
made,  it  cautions  that it is  impossible  to predict  the  actual  outcome of
numerous factors and, therefore, readers should not place undue reliance on such
statements.  Forward-looking statements speak only as of the date they are made,
and the Company  undertakes no obligation to update such  statements in light of
new information or future events.



















                                       12


<PAGE>


                           PART II - OTHER INFORMATION



Item 1.           Legal Proceedings
                  On May 22,  1996,  the Staff of the Federal  Trade  Commission
                  (the  "FTC")  filed an  administrative  complaint  against the
                  Company alleging that the Company is in violation of Section 5
                  of the Federal Trade Commission Act for its practices relating
                  to warehouse  clubs.  The  complaint  alleges that the Company
                  reached   understandings  with  various  suppliers  that  such
                  suppliers  not sell to the clubs the same items that they sell
                  to the Company.  The  complaint  also alleges that the Company
                  "facilitated understandings" among the manufacturers that such
                  manufacturers  not sell to clubs. The complaint seeks an order
                  that the  Company  cease and desist  from this  practice.  The
                  matter  was tried  before an  administrative  law judge in the
                  period from March  through May of 1997. On September 30, 1997,
                  the   administrative  law  judge  filed  an  Initial  Decision
                  upholding the FTC's complaint against the Company.  On October
                  13, 1998,  the FTC issued a final order and opinion  upholding
                  the FTC's complaint against the Company.

                  The  Company  has  appealed  the FTC's  decision to the United
                  States  Court of Appeals for the Seventh  Circuit.  The appeal
                  was argued on May 18, 1999.

                  After the filing of the FTC  complaint,  several  class action
                  suits  were  filed  against  the  Company  in State  courts in
                  Alabama and California, alleging that the Company has violated
                  certain  state  competition  laws  as  a  consequence  of  the
                  behavior  alleged  in the FTC  complaint.  After  the  Initial
                  Decision was handed  down,  more than thirty  purported  class
                  actions  were  filed in  federal  and state  courts in various
                  jurisdictions  alleging  that the  Company  has  violated  the
                  federal  antitrust  laws  as a  consequence  of  the  behavior
                  alleged  in the FTC  complaint.  In  addition,  the  attorneys
                  general of  forty-four  states,  the  District of Columbia and
                  Puerto  Rico have filed a suit  against  the  Company in their
                  capacity as  representatives of the consumers of their states,
                  alleging  that the  Company  has  violated  federal  and state
                  antitrust laws as a consequence of the behavior alleged in the
                  FTC complaint. These suits seek damages in unspecified amounts
                  and other relief under state and/or federal law.

                  The Company  believes  that it has always  acted fairly and in
                  the best  interests of its  customers and that both its policy
                  and its conduct in connection with the foregoing have been and
                  are within the law. However, to avoid the cost and uncertainty
                  of protracted  litigation the Company has reached an agreement
                  to settle,  subject to court approval, all of the class action
                  and attorney  general lawsuits in a manner which will not have
                  a material adverse effect on its financial condition,  results
                  of   operations  or  cash  flow.   The  Company   accrued  all
                  anticipated  costs  relating  to this matter as of January 30,
                  1999.




                                                 13


<PAGE>


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

          At the  Company's  Annual  Meeting  on  June  9,  1999  all of
          management's nominees for director were elected.

          Management's  nominees  for director  received  the  following
          votes:

<TABLE>
<CAPTION>
              <S>                       <C>                              <C>

                                   Number of Shares              Withheld Votes
          Robert A. Bernard          207,887,124                    2,137,065
          RoAnn Costin               207,897,080                    2,127,109
          Michael Goldstein          207,905,353                    2,118,836
          Calvin Hill                207,904,714                    2,119,475
          Shirley Strum Kenny        207,903,277                    2,120,912
          Charles Lazarus            207,897,526                    2,126,663
          Norman S. Matthews         207,881,052                    2,143,137
          Howard W. Moore            207,903,280                    2,120,904
          Robert C. Nakasone         207,905,243                    2,118,946
          Arthur B. Newman           207,892,935                    2,131,254

          Also approved by the following  vote was a proposal to approve
          the  new   Non-Employee   Directors'   Compensation   Program:
          143,453,596  shares were voted in favor of,  65,704,735 shares
          were voted against,  and 865,856 shares  abstained  from, such
          proposal; and

          also defeated by the following votes were:

          (i)    a proposal to approve the Stockholder Proposal No. 1
                 - Maximize Value Resolution, 156,552,522 shares were
                 voted against, 13,585,812 shares were voted in favor
                 of,  and  987,072  shares   abstained   from,   such
                 proposal; and

         (ii)    a proposal to approve the Stockholder Proposal No. 2
                 -  Request   for   Monitoring   Report   Resolution,
                 151,115,695  shares  were voted  against,  9,269,796
                 shares were voted in favor of, and 10,739,915 shares
                 abstained from, such proposal.


Item 6.   Exhibits and Reports on Form 8-K

          (a)   Exhibits:

                10.1  - Separation and Release Agreement, dated
                August 26, 1999 between the Company and Robert C.Nakasone.

                27.1 - Financial  Data Schedule for the quarter ended
                July 31, 1999.
<FN>
</FN>
</TABLE>

                                     14

<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 13, 1999                  Toys "R" Us, Inc.
                                                    ---------------------------
                                                    (Registrant)






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












                                         15




































                                                            EXHIBIT 10.1





                        SEPARATION AND RELEASE AGREEMENT

                  This Separation and Release Agreement ("Agreement") is entered
into as of this 26th day of August,  1999  between TOYS "R" US, INC., a Delaware
corporation and any successor thereto  (collectively,  the "Company") and Robert
C. Nakasone (the "Executive").

                  The Executive and the Company agree as follows:

                  1.       The employment relationship between the Executive and
                           the Company will terminate  effective as of September
                           5, 1999 (the "Termination Date").
                  2.       In   accordance   with  the   Executive's   Retention
                           Agreement (the  "Retention  Agreement"),  the Company
                           has  agreed  to  pay  the   Executive  the  following
                           payments and to make the following benefits available
                           after the Termination Date:
Salary.
                 (i)       The Company will pay  Employee a lump sum cash amount
                           of $803,793  within 30 days of the Termination  Date.
                (ii)       From the Termination Date through the Second
                           Anniversary of the Termination Date the Company will
                           pay Executive an aggregate of $4,293,360 in equal
                           installments,made at least monthly over the 24 months
                           following Termination  Date,such amount to be payable
                           in  accordance  with the  Company's  regular payroll
                           policies  as in effect from time to time.
                           In addition,   if  the   Company's Strategic Bonus
                           Plan is extended or replaced by a new plan after
                           2000, the Company shall pay Executive $262,500 upon
                           the extension or replacement of such plan.
              (iii)        All payments to Executive  under this Section 2(a)
                           will be less applicable withholdings  for  federal,
                           state  and local  taxes.
Stock Options.
               (iv)        All unvested  options and all unvested  profit shares
                           held by the Executive,  or for the benefit of the
                           Executive, shall vest on the Termination Date.
                (v)        Any other unvested equity based award (including,
                           without limitation, restricted stock and stock units)
                           held by the Executive shall vest on the Second
                           Anniversary of the Termination Date on a pro rata
                           basis determined by a specific fraction, where the
                           numerator of the fraction is the number of months
                           elapsed from the grant of such equity award through
                           the Termination Date plus 24 months after the
                           Termination Date, and the denominator of the fraction
                           is the total number of months in the vesting period
                           for such award, and shall be delivered to the
                           Executive entirely in the form of the Company's
                           common stock on the second anniversary of the
                           Termination Date, subject to compliance with the
                           terms of this Agreement through such date.




                (vi)       Options  held  by  the  Executive  that  are
                           vested  on  the  Termination  Date  or  vest
                           thereafter pursuant to this Section 2(b) may
                           be exercised  until the  expiration  date of
                           such options.
                (vii)      Executive  shall  not  be  entitled  to  any
                           additional  grants  of  any  stock  options,
                           restricted  stock,  or other equity based or
                           long term awards.
               (viii)      Any and all options to acquire  stock in the
                           Company's  subsidiary,   Toysrus.com,  Inc.,
                           shall  vest  with  such  options   remaining
                           exercisable for the original exercise period
                           thereof.

Benefit Plans (Other than Health). The Company shall continue to provide, in the
manner and timing  provided for in the benefit and welfare  plans,  policies and
programs of the Company in which Executive  participates on the Termination Date
(other than as provided in  Sections  2(a) and 2(b) above and 2(d)  below),  the
benefits  provided  under  such plans that the  Executive  would  receive if the
Executive's  employment  continued  for two years  after the  Termination  Date,
assuming for this purpose that the  Executive's  compensation is the amount paid
pursuant to Section  2(a)(ii) above,  and the Executive shall be fully vested in
any account balance and all other benefits under such plans; provided,  however,
that the  benefits  provided  under  this  Section  2(c) shall be limited to the
amounts permitted by law or as would otherwise not potentially  adversely impact
on the tax  qualification  of any such plans;  provided,  further,  that if such
benefits may not be  continued  under such plans,  the Company  shall pay to the
Executive  an  amount  equal  to the  Company's  cost  had  such  benefits  been
continued.  Health  Benefits.  The  Executive  (and  his  spouse  and  dependent
children) will be entitled to  continuation  of health  benefits under the Plans
(as such term is defined in the Retention Agreement) until Executive is 65 years
old at a level  commensurate  with the Executive's  current  position and if the
Executive  (or his  spouse and  dependent  children  upon his  death)  elects to
receive such health  benefits,  the Executive  shall pay the premium  charged to
former employees of the Company pursuant to Section 4980B of the Code; provided,
that the Company can amend or otherwise  alter the Plans to provide  benefits to
the  Executive  that are no less than those  commensurate  with the  Executive's
current position;  provided, that to the extent such benefits cannot be provided
to the Executive  under the terms of the Plans or the Plans cannot be so amended
in any manner not adverse to the Company,  the Company shall pay the  Executive,
on an after-tax  basis,  an amount  necessary  for the Executive to acquire such
benefits from an independent  insurance carrier; and provided further,  that the
obligations of the Company under this clause 2(d) shall be terminated if, at any
time after the  Termination  Date,  the  Executive  is employed or is  otherwise
affiliated with a party that offers comparable health benefits to the Executive.
Automobile.  Executive  shall  return any leased or  Company  automobile  on the
Second  Anniversary  of the  Termination  Date.  No  Other  Benefits.  Executive
acknowledges  that he is not entitled to receive benefits from the Company other
than as set forth in this Section 2, except for any benefits afforded  Executive
by applicable law.  Effectiveness  of Payments.  No payments shall be made under
this Section 2 until this  Agreement  becomes  effective  pursuant to Section 12
hereof.

    3. In consideration of the above, the sufficiency of which the Executive
       hereby acknowledges, the Executive,on behalf of the Executive and the
       Executive's heirs, executors and assigns, hereby releases and forever
       discharges the Company and its members, parents, affiliates,
       subsidiaries, divisions, any and all current and former directors,
       officers, employees, agents, and contractors and their heirs and



      assigns, and any and all employee pension benefit or welfare benefit plans
      of the Company, including current and former trustees and administrators
      of such employee pension benefit and welfare benefit plans, from all
      claims, charges, or demands, in law or in equity, whether known or
      unknown, which may have existed or which may now exist from the beginning
      of time to the date of this letter agreement, including, without
      limitation, any claims the Executive may have arising from or relating to
      the Executive's employment or termination from employment with the
      Company, including a release of any rights or claims the Executive may
      have under Title VII of the Civil Rights Act of 1964, as amended, and the
      Civil Rights Act of 1991 (which prohibit discrimination in employment
      based upon race, color, sex, religion, and national origin); the Americans
      with Disabilities Act of 1990, as amended, and the Rehabilitation Act of
      1973(which prohibit discrimination based upon disability); the Family and
      Medical Leave Act of 1993 (which prohibits discrimination based on
      requesting or taking a family or medical leave); Section 1981 of the Civil
      Rights Act of 1866 (which prohibits discrimination based upon race);
      Section 1985(3) of the Civil Rights Act of 1871 (which prohibits
      conspiracies to discriminate); the Employee Retirement Income Security Act
      of 1974, as amended (which prohibits discrimination with regard to
      benefits); any other federal, state or local laws against
      discrimination; or any other federal, state, or local statute, or common
      law relating to employment, wages, hours, or any other terms and
      conditions of employment.  This includes a release by the Executive of any
      claims for wrongful discharge, breach of contract, torts or any other
      claims in any way related to the Executive's employment with or
      resignation or termination from the Company. This release also includes a
      release of any claims for age discrimination under the Age Discrimination
      in Employment Act, as amended ("ADEA").  The ADEA requires that the
      Executive be advised to consult with an attorney before the Executive
      waives any claim under ADEA.  In addition, the ADEA provides the Executive
      with at least 21 days to decide whether to waive claims under ADEA and
      seven days after the Executive signs the Agreement to revoke that waiver.

                  Additionally,  the Company agrees to discharge and release the
Executive and the Executive's heirs from any claims,  demands,  and/or causes of
action  whatsoever,  presently  known or  unknown,  that are  based  upon  facts
occurring  prior to the date of this Agreement,  including,  but not limited to,
any  claim,  matter or  action  related  to the  Executive's  employment  and/or
affiliation with, or termination and separation from the Company;  provided that
such  release  shall not release the  Executive  from any loan or advance by the
Company or any of its subsidiaries,  any act that would constitute "Cause" under
the Executive's Retention Agreement or a breach under Sections 8(b), 10 or 12(e)
of the Executive's Retention Agreement.

                  4. This  Agreement is not an admission by either the Executive
                     or the Company of any wrongdoing or liability.

                  5. The Executive  waives any right to  reinstatement  or
                     future  employment  with the  Company  following  the
                     Executive's   separation  from  the  Company  on  the
                     Termination Date.



                  6.       The  Executive  agrees not to engage in any act after
                           execution  of the  Separation  and Release  Agreement
                           that is intended,  or may  reasonably  be expected to
                           harm   the   reputation,   business,   prospects   or
                           operations of the Company,  its officers,  directors,
                           stockholders or employees. The Company further agrees
                           that it will engage in no act which is  intended,  or
                           may  reasonably  be expected to harm the  reputation,
                           business or prospects of the Executive.

                  7.       The Executive  shall continue to be bound by Sections
                           10 and 12(e) of the Executive's  Retention Agreement;
                           provided,  Section  10(h) of the Retention is amended
                           by deleting  clause (i) thereof and replacing it with
                           the following:

                  "(i)  "Restricted  Business"  means any  retail  store or mail
                  order business or any business,  deriving at least 10% or more
                  of its  revenues  from the  manufacture  or marketing of toys,
                  juvenile or baby  products,  juvenile  furnture or  children's
                  clothing."

                  8.       The Executive  shall promptly  return all the Company
                           property in the  Executive's  possession,  including,
                           but not limited to, the Company  keys,  credit cards,
                           cellular  phones,  computer  equipment,  software and
                           peripherals   and   originals  or  copies  of  books,
                           records,  or  other  information  pertaining  to  the
                           Company  business.  The  Executive  shall  return any
                           leased or Company automobile at the expiration of the
                           restrictions  under Section 10(d) of the  Executive's
                           Retention Agreement.

                  9.       This Agreement  shall be governed by and construed in
                           accordance  with the laws of the State of New Jersey,
                           without  reference to the  principles  of conflict of
                           laws.  Exclusive  jurisdiction  with  respect  to any
                           legal  proceeding   brought  concerning  any  subject
                           matter  contained in this Agreement  shall be settled
                           by  arbitration   as  provided  in  the   Executive's
                           Retention Agreement.

                  10.      This Agreement represents the complete agreement
                           between the Executive and the Company concerning the
                           subject matter in this Agreement and supersedes all
                           prior agreements or understandings, written or oral,
                           including without limitation, any employment
                           agreement, arrangement or understanding and any other
                           agreement (including agreements, arrangements or
                           understandings with respect to stock options and
                           other benefits and compensation) between the Company
                           (or its subsidiaries), except that the Stock Unit
                           Agreement between the Company and Executive
                           (as modified by Section 2(b) above) and the
                           Partnership Option Agreements between the Company and
                           Executive dated February 1, 1993, December 7, 1993,
                           May 17, 1995, March 14, 1996, June 20 1997, November
                           3, 1997, March 13, 1998, September 8, 1998, June 6,
                           1999 and April 7, 1999 (each as modified by Section 2
                           (b) above) shall continue in full force and effect.
                           This Agreement may not be amended or modified
                           otherwise than by a written agreement executed by the
                           parties hereto or their respective successors and
                           legal representatives.

                  11.      Each of the  sections  contained  in  this  Agreement
                           shall be  enforceable  independently  of every  other
                           section  in this  Agreement,  and the  invalidity  or




                           nonenforceability of any section shall not invalidate
                           or render  unenforceable  any other section contained
                           in this Agreement.

                  12.      It is further  understood that for a period of 7 days
                           following   the   execution  of  this   Agreement  in
                           duplicate  originals,  the  Executive may revoke this
                           Agreement,   and  this  Agreement  shall  not  become
                           effective or enforceable  until the revocation period
                           has expired.  No revocation of this  Agreement by the
                           Executive  shall be effective  unless the Company has
                           received within the 7-day revocation period,  written
                           notice of any revocation,  all monies received by the
                           Executive  under this Agreement and all originals and
                           copies of this Agreement.
                  13.      This Agreement has been entered into  voluntarily and
                           not  as  a  result  of  coercion,  duress,  or  undue
                           influence.   The  Executive   acknowledges  that  the
                           Executive has read and fully understands the terms of
                           this  Agreement  and has been advised to consult with
                           an  attorney   before   executing   this   Agreement.
                           Additionally,  the  Executive  acknowledges  that the
                           Executive  has been  afforded the  opportunity  of at
                           least 21 days to consider this Agreement.

                  The parties to this  Agreement have executed this Agreement as
                  of the day and year first written above.



                                         TOYS "R" US, INC.


                                         By:      /s/ Michael Goldstein
                                                  Name:
                                                  Title:


                                         ROBERT C. NAKASONE


                                                 /s/ Robert C. Nakasone