Brookstone Inc – ‘10-K405’ for 2/3/01

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Annual Report — [x] Reg. S-K Item 405   —   Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K405     Annual Report -- [x] Reg. S-K Item 405                59    253K 
 2: EX-10.28    Employment Agrmt. Between Co. & Gregory B. Sweeney     4     15K 
 3: EX-21       Subsidiaries                                           1      5K 

10-K405   —   Annual Report — [x] Reg. S-K Item 405
Document Table of Contents

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SECURITIES AND EXCHANGE COMMISSION  
Washington, D.C. 20549  
FORM 10-K 

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  
SECURITIES EXCHANGE ACT OF 1934 

For the fiscal year ended February 3, 2001  

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE 
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) 

For the transition period from        to      
                                ------    ------

Commission File Number 0-21406  
BROOKSTONE, INC.  
(Exact name of registrant as specified in its charter)  

DELAWARE                                  06-1182895      
--------                                  ----------      
(State or other jurisdiction of            (IRS Employer Identification No.)    
incorporation or organization)                                                  

17 RIVERSIDE STREET, NASHUA, NH                         03062                   
-------------------------------                         -----                   
(Address of principal executive offices)             (Zip Code)                 

Registrant's telephone number, including area code 603-880-9500 

Securities registered pursuant to Section 12(b) of the Act:   

Title of each class   
-------------------   

None  

Securities registered pursuant to Section 12(g) of the Act:   
Common Stock, par value $.001 

 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 [_].                                                                 

    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements   
incorporated by reference in Part III of this Form 10-K or any amendment to this
form 10-K. (X)                                                                  

  The aggregate market value of the voting stock held by non-affiliates of
the registrant on April 20, 2001 was $129,498,966                               

  The number of shares outstanding of the registrant's Common Stock, $.001
par value, as of April 20, 2001 was 8,354,772 shares.                           

Documents Incorporated By Reference 

     Portions of the registrant's Proxy Statement for its 2002 Annual Meeting of
Stockholders are incorporated by reference in Part III hereof.                  

Table of Exhibits appears on Page 58. 

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BROOKSTONE, INC.  

2000 FORM 10-K ANNUAL REPORT  
Table of Contents 

                                                                        Page No.
                                                                        --------
Item 1   Business                                                           3   
Item 2   Properties                                                        11   
Item 3   Legal Proceedings                                                 11   
Item 4   Submission of Matters to a Vote of Securities Holders             12   
Item 4A. Executive Officers of the Registrant                              12   
Item 5   Market for Registrant's Common Equity and Related                      
      Stockholders Matters                                              14
Item 6   Selected Financial Data                                           15   
Item 7   Management's Discussion and Analysis of Financial Condition            
      and Results of Operations                                         16
Item 8   Financial Statements and Supplementary Data                       25   
Item 9   Changes in and Disagreements with Accountants on Accounting            
      and Financial Disclosure                                          25
Item 10  Directors and Executive Officers of the Registrant                25   
Item 11  Executive Compensation                                            25   
Item 12  Security Ownership of Certain Beneficial Owners and Management    25   
Item 13  Certain Relationships and Related Transactions                    25   
Item 14  Exhibits, Financial Statement Schedules and Reports on Form 8-K   26   

Exhibits Filed Herewith:                                                        
-----------------------                                                         
Exhibit 10.28    Employment Agreement with Gregory B. Sweeney              61   
Exhibit 21       Subsidiary of Registrant                                  65   

                                                                               2

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ITEM 1. Business                                                                

    Brookstone, Inc. is a nationwide multi-channel specialty retailer offering
an assortment of consumer products functional in purpose, distinctive in quality
and design and not widely available from other retailers. Brookstone's          
merchandise includes lawn and garden, health and fitness, home and office and   
travel and auto products. The Company offers approximately 2,500 active stock-  
keeping units ("SKUs") at any given time. Brookstone sells its products through 
223 full-year stores (including 14 airport based stores and 3 outlet stores) in 
38 states, the District of Columbia and Puerto Rico. In addition to these full- 
year stores, Brookstone operates temporary stores and kiosks during the winter  
holiday season; there were a total of 60 such stores operating during the 2000  
holiday season. Brookstone also operates a direct marketing business, which     
includes its traditional Hard-to-Find Tools, its Brookstone Gift Collection and 
its Gardeners Eden catalogs in addition to an interactive Internet site,        
www.Brookstone.com. For a further description of the Company's business         
segments, see Note 6 of the Notes to Consolidated Financial Statements on       
page 40.                                                                        

    The Company was incorporated in Delaware in 1986. The Company is a holding
company, the principle asset of which is the capital stock of Brookstone        
Company, Inc., a New Hampshire corporation that, along with its direct and      
indirect subsidiaries, operates Brookstone's business. As used in this report,  
unless the context otherwise requires, the terms "Company" and "Brookstone"     
refer collectively to Brookstone, Inc. and its operating subsidiaries. The      
Company's executive offices are located at 17 Riverside Street, Nashua, New     
Hampshire 03062 and its telephone number is (603) 880-9500.                     

RETAIL STORE BUSINESS                                                           

MERCHANDISING AND MARKETING                                                     

   Merchandising. Brookstone seeks to be a leader in identifying and selling
products which are functional in purpose, distinctive in quality and design and 
not widely available from other retailers. Brookstone's products are intended to
make some aspect of the user's life easier, better, more enjoyable or more      
comfortable. A majority of the Company's products bear the Brookstone name in an
effort to reinforce its franchise value and generate customer loyalty.          

The following lists the Company's four current product worlds and 23  
current product categories:                                                     

Lawn & Garden         Health & Fitness         Home & Office    Travel & Auto   
Backyard Leisure      Personal Care            Audio/Video      Automobile      
Garden                Personal Accessories     Optical          Travel          
Outdoor Games         Home Comfort             Wine             Safety/Security 
Christmas             Household                Kitchen          Lighting        
Pool / Beach          Bedding                  Games            Tools           
Time / Weather        Massage                  Stationery                       

                                                                               3

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The Company believes that the high quality construction, innovation and design  
of its products are apparent to its customers. For example, Brookstone offers a 
five-piece garden tool set, which is ergonomically designed, and made of high   
strength, rustproof aluminum. This design and construction are intended to      
convey the message that this tool set will tend to outlast and be easier to work
with than competing garden tools in a similar price range. Information on the   
features and benefits of products is further conveyed through display cards and 
attentive customer service.                                                     

    The qualities of Brookstone's products make them suitable for gift giving.
A majority of the Company's sales are attributable to products purchased as     
gifts, especially for men, and the Company's two busiest selling seasons occur  
prior to Christmas and Father's Day. The distinctive quality and design of      
Brookstone's products are intended to create an image that each product is      
special. In addition, Brookstone's effort to educate its customers about its    
products is often important in connection with the purchase of a gift,          
particularly if the customer is uncertain as to which product features might be 
most attractive to the recipient.                                               

Brookstone prices its products to be affordable to the typical mall   
shopper. The majority of the Company's products are priced at less than $40.00, 
although the items in its stores are priced in a range from $5.00 to            
approximately $3,000. Brookstone closely monitors gross profit dollar           
contribution by SKU and adjusts merchandise displays accordingly on a monthly   
basis.                                                                          

The Company's success depends to a large degree upon its ability to   
introduce new or updated products in a timely manner. The Company's current     
policy is to replace or update approximately 30% of the items in its merchandise
assortment every year, thereby maintaining customer interest through the        
freshness of its product selections and further establishing Brookstone as a    
leader in identifying high quality, functional products which are not widely    
available from other retailers. While the average sales life of Brookstone      
products is between two and four years, the sales life of certain products may  
be significantly shorter.                                                       

     The Brookstone Store. Brookstone believes its retail stores are distinctive
in appearance and in the shopping experience they provide. The Company          
emphasizes the visual aspects of its merchandise presentation and the creation  
of a sense of "theater" in its stores. Recognizing the functional nature of many
of its products, Brookstone strives to present its merchandise in a manner that 
will spark the interest of shoppers and encourage them to pick up sample        
products. At least one sample of each product is displayed with an information  
card highlighting the features and benefits of the product in an easy-to-read   
format. Special signs and displays give prominence to selected products which   
the Company believes will have particular appeal to shoppers.                   

     Seasonal Stores. Brookstone's seasonal stores are typically open during the
winter holiday selling season. These include both kiosks positioned in common   
areas of shopping malls and other retail sites and temporary stores set up      
within vacant retail in-line space. These locations are designed to carry a     
limited line of the Company's most popular, gift-oriented merchandise. The      
typical Brookstone kiosk is a temporary structure of approximately 160 square   
feet, which can carry approximately 120 SKUs. The typical temporary store has   
approximately 1,500 square feet and is designed to carry up to 300 SKUs. Both   
kiosks and temporary stores are built with reusable, portable and modular       
materials.                                                                      

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Marketing. The Company's principal marketing vehicle is the Brookstone
store. Brookstone's eye-catching open storefront design and attractive window   
displays are designed to attract shoppers into its stores by highlighting       
products that are anticipated to be of particular interest to customers and are 
appropriate to the season. In addition, the Company creates in-store displays of
many of its key products in attractively gift-wrapped packages to provide added 
convenience to its customers, particularly during its two busiest selling       
periods, Christmas and Father's Day. Both the Company's Brookstone Gift         
Collection catalog and its Internet operations identify its retail store        
locations, and the stores advertise the Internet program and supply customers   
with catalogs. The Company's merchandising strategy does not depend on price    
discounting.                                                                    

PRODUCT SOURCING                                                                

Brookstone continually seeks to develop, identify and introduce new   
products, which meet its quality and profitability standards. Brookstone employs
nine specialized merchandise buyers who actively participate in the design      
process for many new products. These buyers also travel worldwide visiting trade
shows, manufacturers and inventors in search of new products for Brookstone's   
stores, Internet site and catalogs. The Company has product development sourcing
agents in Hong Kong, Paris, Taipei and Tokyo. These agents provide the Company  
with important venues for developing relationships with manufacturers and allow 
the Company to monitor and maintain quality standards throughout the development
and manufacturing process. During Fiscal 1999 the Company established           
"Brookstone Labs," an internal product design and development team which, in    
cooperation with the merchandise buyers, provides design and engineering support
for innovative Brookstone-branded products.                                     

Those products not developed in-house meeting the Company's initial   
merchandise selection criteria are tested and reviewed by the Company's quality 
control department. Company associates home-test many products as part of this  
quality control review. Once a product has been approved, Brookstone begins     
negotiations with the product's vendor to secure a source of supply. When       
determining which products to introduce, the Company takes into account the     
probable cost of the product relative to what the Company believes the product's
appropriate selling price will be, as well as whether the vendor expects to     
distribute the product through mass merchant channels, thereby diluting the     
sense of uniqueness which Brookstone seeks to convey to its customers. While the
time between the approval of a new product and its introduction in the stores   
varies widely, the typical period is between two and four months. For products  
designed by the Company, the period from conception of the idea to introduction 
in the stores can be significantly longer.                                      

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STORE OPERATION AND TRAINING                                                    

  Three regional managers, 13 district managers and six assistant district
managers supervise the Company's stores. Staffing of a typical store includes a 
store manager who supervises an assistant store manager, a second assistant     
store manger, and approximately 10 to 15 full- and part-time sales associates,  
depending upon the time of year. Store associates are trained to inform and     
assist customers in the features, benefits and operation of Brookstone          
merchandise. Store associates receive weekly product updates from the Company's 
headquarters, which highlight both new and other selected products. Brookstone  
has developed incentive compensation programs for regional, district, assistant 
district, store and assistant store managers which reward individual and store  
performance based on profitability.                                             

 The Company uses "Closing Strong," a selling skills program designed to
train all associates in the art of identifying and qualifying customers, and in 
closing the sale. The program focuses on generating incremental sales through   
increasing demo sales, units per transaction and big-ticket sales.              

EXPANSION STRATEGY                                                              

Brookstone currently operates 223 stores in 38 states, the District of
Columbia and Puerto Rico. Brookstone's stores are primarily located in high     
traffic regional malls, as well as in central retail districts and multi-use    
specialty projects, such as Copley Square in Boston, The Forum Shops in Las     
Vegas and Rockefeller Center and West 57th Street in New York City. Brookstone's
stores also include airport stores in terminals throughout the country.         

 Brookstone locates its stores in areas which are destinations for large
numbers of shoppers and which reinforce the Company's quality image. To assess  
potential new mall locations, Brookstone applies a stringent set of financial as
well as other criteria to determine the overall acceptability of a mall and the 
optimal locations within it. Non-mall locations are selected based on the level 
and nature of retail activity in the area. Brookstone believes that its         
distinctive store and innovative merchandise provide a unique shopping          
experience, which makes it a desirable tenant to regional mall developers and   
other prospective landlords. The Company's new stores average approximately     
3,500 square feet, approximately 2,800 of which is selling space. Airport stores
range from 600 to 2,000 square feet in size and typically carry a limited       
assortment of the Company's products.                                           

     Brookstone's store expansion strategy is to open stores in existing markets
where it can build on its name recognition and achieve certain operating        
economies of scale, and in new markets where management believes it can         
successfully transport Brookstone's unique positioning and strategy. Brookstone 
opened 14 stores in Fiscal 2000, including two airport stores; 15 stores in     
Fiscal 1999, one of which was an airport store; 24 stores in Fiscal 1998, seven 
of which were airport stores; 19 stores in Fiscal 1997 including three airport  
stores; and 16 stores in Fiscal 1996. The Company plans to open approximately 15
to 20 new Brookstone stores, up to five of which will be in airport locations,  
and approximately three new Gardeners Eden stores during Fiscal 2001. Brookstone
continually monitors individual store profitability and will consider closing   
any stores that do not meet its performance criteria. Brookstone closed two     
stores in Fiscal 2000, no stores in Fiscal 1999, five stores in Fiscal 1998, and
one store in each of Fiscal 1997, Fiscal 1996.                                  

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Brookstone operated 60 seasonal stores (31 kiosks and 29 temporary    
in-line) during the 2000 winter holiday season. During the 1999 winter holiday  
selling season, Brookstone operated 71 seasonal stores (44 kiosk and 27         
temporary in-line) ; 95 seasonal stores (52 kiosk and 43 temporary in-line)     
during the 1998 winter holiday season and 50 temporary in-line seasonal stores  
during the 1998 summer season; 138 seasonal stores (75 kiosk and 63 temporary   
in-line) during the 1997 winter holiday selling season and 13 temporary in-line 
seasonal stores during the 1997 summer season and 121 seasonal stores (62 kiosk 
and 59 temporary in-line) during the 1996 winter holiday selling season.        
Brookstone plans to operate approximately 60 seasonal stores during the 2001    
winter holiday selling season based on the availability of acceptable sites. Use
of seasonal stores also provides the Company the ability to test retail sites   
during the period of the year when customer traffic and sales prospects are     
greatest. In certain cases, seasonal stores may be operated at a mall where     
there is a Brookstone retail store. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - - Outlook: Important Factors and
Uncertainties" (found on 22-24 of this document).                               

Gardeners Eden. Beginning in Fiscal 2001 the Company will launch a new
retail store concept tied to its Gardeners Eden catalog title. The stores will  
contain approximately 4,000 - 5,000 sq. ft. of interior selling space coupled   
with exterior selling space of approximately 1,500 sq. ft. These stores will    
carry lifestyle products dedicated to the home and garden including furniture,  
dinnerware and flatware, lighting, plants and plant accessories and decorator   
items. The products will be displayed in a home like environment and in the     
Brookstone tradition, these stores will be distinctive in nature and reflect the
quality the Company is characterized for. The Company through extensive research
believes there to be a significant market for a store of this type and will     
begin testing the concept with up to three stores in Fiscal 2001.               

DIRECT MARKETING BUSINESS                                                       

 Brookstone was founded in 1965 as a mail order marketer of hard-to-find
tools. In Fiscal 2000, the direct marketing business accounted for approximately
18% of the Company's net sales as compared to 17% of the Company's net sales in 
Fiscal 1999 and 12% in Fiscal 1998. The Company operates three catalogs,        
Hard-to-Find-Tools, Brookstone Gift Collection and Gardeners Eden. In Fiscal    
2000, Brookstone mailed a total of approximately 40.5 million catalogs, with 31 
separate mail dates.                                                            

     The Hard-To-Find Tools catalog features a broad assortment of approximately
1,500 products, set forth in what the Company believes to be an informative and 
convenient format. Whereas most of the products sold through the Company's      
stores are sold as gifts, most of the products sold through the Hard-To-Find    
Tools catalog are primarily sold directly to the end-user. Approximately 80-85% 
of the products in the Hard-To-Find Tools catalog are not available in the      
Company's stores.                                                               

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 The Company also produces the Brookstone Gift Collection catalog, which
offers a selection of merchandise generally available in the Company's retail   
stores. The Brookstone Gift Collection catalog is usually distributed before    
Father's Day and Christmas, the Company's two busiest selling seasons. The      
Brookstone Gift Collection catalog is mailed to persons with demographic        
profiles similar to those of buyers in the Company's stores.                    

In May 1999, the Company acquired the Gardeners Eden catalog from Williams-     
Sonoma, Inc. The core product categories of the catalog are; Plants, Furniture &
Accessories, Plant Containers & Accessories, Wreath & Dried Arrangements, Garden
Tools, Indoor and Outdoor Decorative, Entry, Tabletop and Personal Care. Product
assortment within these categories ranges from fine teak furniture to fresh     
plants.                                                                         

During Fiscal 1997, Brookstone created an interactive Internet site at
www.Brookstoneonline.com, featuring an offering of current products from both   
the Hard-To-Find-Tools and Brookstone Gift Collection catalogs. In January of   
1999, following the successful resolution of lengthy negotiations, the Company  
obtained the domain name of www.Brookstone.com. The site has subsequently been  
upgraded to include enhanced speed, additional product categories and SKU       
content and increased site functionality. During the fourth quarter of Fiscal   
1999, Brookstone entered into an agreement with Cyberian Outpost, Inc. pursuant 
to which Cyberian Outpost, Inc. purchases product from Brookstone to sell to    
third parties via a Brookstone-specific section of Cyberian Outpost, Inc.'s     
website located at www.outpost.com. Further in Fiscal 2000, the Company entered 
into an agreement with Cyberian Outpost, Inc. pursuant to which Cyberian Outpost
manages the Company's web site www.brookstone.com and virtually all of the      
customer service and distribution associated with Internet orders. In April     
2001, Cyberian Outpost, Inc. ("Outpost") issued several Press Releases. In their
Press Releases which address Fiscal 2001 operating results, Outpost commented   
that they were having difficulty obtaining required working capital financing.  
Brookstone is continuing to conduct business with Outpost on a cash basis and   
exploring alternatives.                                                         

MERCHANDISING, MARKETING AND PRODUCT SOURCING                                   

Brookstone employs a two-person merchandising team that is dedicated  
exclusively to identifying products for the Company's Hard-To-Find-Tools        
catalog. The approval process for new Hard-To-Find-Tools products is similar to 
the approval process for new products in the Company's stores. One dedicated    
buyer selects products for the Brookstone Gift Collection catalog from the      
product assortment available in the Company's stores, plus catalog-exclusive    
products in existing categories. A three person merchandising team is dedicated 
to the selection of products for the Gardeners Eden catalog. Products for all   
catalogs are chosen based on their previous or estimated direct marketing order 
productivity.                                                                   

    The Company also employs a four-person marketing team responsible for list
selection, management of marketing offers and tests of catalog activity. As     
noted in more detail below, the Company's Mexico, Missouri distribution and call
centers, handle almost all in-bound telemarketing and fulfillment for all three 
catalog titles.                                                                 

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DISTRIBUTION AND MANAGEMENT INFORMATION SYSTEMS                                 

 The Company operates a single 181,000 square foot distribution facility
located in Mexico, Missouri. Nearly all of the Company's inventory is received  
and distributed through this facility, which supports both the retail store and 
direct marketing distribution systems. The Company maintains an inventory of    
products in the distribution center in order to ensure a sufficient supply for  
sale to customers. Distributions to stores are made, at a minimum, on a weekly  
basis via UPS. Distributions to direct marketing customers are made daily via   
UPS and the U.S. Postal Service. The facility also houses the Company's direct  
marketing call center. Also, the Company uses an outside call center to handle  
overflow order calls and to provide coverage during off-peak hours. In addition 
the Company leases approximately 167,000 square feet in Mexico, Missouri to     
handle its distribution support functions.                                      

   The efficient coordination of inventory planning, inventory logistics and
store operations is a primary focus for the Company. The Company uses           
distribution control software and a sales forecasting system. These systems,    
along with the store-based point-of-sale system, provide daily tracking of item 
activity and availability to the Company's inventory allocation and distribution
teams. Additionally, the Company uses an inventory planning and distribution    
requirements planning client-server based system. This system uses weekly sales 
forecasts by SKU and selling location to determine inventory replenishment      
requirements and will recommend inventory purchases to the merchandise          
procurement team.                                                               

VENDORS                                                                         

   Brookstone currently conducts business with approximately 900 vendors, of
which approximately 300 are located overseas. In Fiscal 2001, no single vendor  
supplied products representing more than 13% of net sales, with the 10 largest  
vendors representing approximately 35% of net sales. Although the Company's     
sales are not dependent on any single vendor, the Company's operating results   
could be adversely affected if any of its 10 largest vendors were unable to     
continue to fill the Company's orders for such vendor's products or failed to   
fill those orders in a timely way.                                              

SEASONALITY                                                                     

    The Company's sales in the second fiscal quarter are generally higher than
sales during the first and third quarters as a result of sales in connection    
with Father's Day. The fourth fiscal quarter, which includes the winter holiday 
selling season, has historically produced a disproportionate amount of the      
Company's net sales and substantially all of its income from operations.        

    The seasonal nature of the Company's business increased in Fiscal 2000 and
is expected to continue to increase in Fiscal 2001 as the Company opens         
additional retail stores and continues its program to operate a significant     
number of small, temporary locations during the                                 

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winter holiday selling season. In Fiscal 2000, most of the Company's new stores 
were opened in the second half of the fiscal year.                              

COMPETITION                                                                     

Competition is highly intense among specialty retailers, traditional  
department stores and mass-merchant discount stores in regional shopping malls  
and other high-traffic retail locations. Brookstone competes for customers      
principally on the basis of product assortment, convenience, customer service,  
price and the attractiveness of its stores. Brookstone also competes against    
other retailers for suitable real estate locations and qualified management     
personnel. Because of the highly seasonal nature of Brookstone's business,      
competitive factors are most important during the winter holiday selling season.

Brookstone differentiates itself from department and mass-merchant    
discount stores, which offer a broader assortment of consumer products, by      
providing a concentrated selection of functional, hard-to-find products of      
distinctive quality and design. The Company believes that the uniqueness,       
functionality and generally affordable prices of its products differentiate it  
from other mall-based specialty retailers and specialty companies, which        
primarily or exclusively offer their products through direct marketing channels.

The Company's direct marketing business competes with other direct    
marketing retailers offering similar products. The direct marketing industry has
become increasingly competitive in recent years, as the number of catalogs      
mailed to consumers has increased and with the advent of the Internet.          

In addition, the Company's retail and direct marketing businesses have
begun to experience competition from other businesses that sell via the         
Internet. While the extent of that competition remains to be seen, the Company  
expects that it will have to compete over the Internet both with its traditional
competitors as they begin to use the Internet as a channel to sell their goods  
and with new "Internet-only" businesses that are seeking to compete in areas    
where the Company does business.                                                

EMPLOYEES                                                                       

     As of April 14, 2001, Brookstone had 1,252 regular full-time associates, of
which 687 were salaried staff and 575 were hourly workers. As of such date, the 
Company also employed an additional 1,303 part-time associates and 308 temporary
hourly workers. The Company regularly supplements its workforce with temporary  
workers, especially in the fourth quarter of each year to service increased     
customer traffic during the peak winter holiday selling season. The Company     
believes that the success of its business depends, in part, on its ability to   
attract and retain qualified personnel. None of Brookstone's employees are      
represented by labor unions, and Brookstone believes its employee relations are 
excellent.                                                                      

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TRADEMARKS                                                                      

     The Company's "BROOKSTONE" trademark has been registered in various product
classifications with the United States Patent and Trademark Office and in       
several foreign countries. In addition, the Company has applications to register
the "BROOKSTONE" trademark still pending in several foreign countries. The      
Company acquired the trademarks "GARDENERS EDEN" and "GARDENERS EDEN (with      
Design)" and their associated registrations with the United States Patent and   
Trademark Office from Williams-Sonoma, Inc. in connection with its acquisition  
of the Gardeners Eden catalog in May 1999. The Company also owns or is seeking  
registration of in various jurisdictions of other marks used by the Company in  
its business.                                                                   

ITEM 2.  PROPERTIES                                                             

     Brookstone leases all of its retail stores. New retail store leases have an
average initial term of 10 years. As of February 3, 2001, the unexpired terms   
under the Company's then existing store leases averaged just under seven years. 
Store leases may permit Brookstone to terminate the lease after five years if   
the store does not achieve specified levels of sales. In most cases, the Company
pays a minimum fixed rent plus a contingent rent based upon net sales of the    
store in excess of a certain threshold. The Company does not believe the        
termination of any particular lease would have a material adverse effect on the 
Company. The following chart describes the number of store leases which will    
expire in the periods indicated:                                                

YEAR                       LEASES EXPIRING    
2001                              17          
2002                              11          
2003                               8          
2004                              11          
2005                              23          
2006 and thereafter              153          

   The space for a seasonal store is leased only for the period during which
the temporary location will be operating. Generally, each such location is      
leased only for the season in question, although certain agreements have been   
reached with landlords covering more than a single season. The Company generally
pays a minimum fixed rent for each temporary location plus a contingent rent    
based upon net sales in excess of a certain threshold.                          

ITEM 3.  LEGAL PROCEEDINGS                                                      

   Brookstone is involved in various routine legal proceedings incidental to
the conduct of its business. The Company does not believe that any of these     
legal proceedings will have a material adverse effect on Brookstone's financial 
condition or results of operations.                                             

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ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                    

No matters were submitted to a vote of security holders of the Company
during the fourth quarter of Fiscal 2000.                                       

ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT                                   

The executive officers of the Company are as follows:                 

NAME                AGE     PRESENT POSITION                          
------------------  ---     --------------------------------------    
Michael F. Anthony  46      Chairman of the Board, President and      
         Chief Executive Officer
Philip W. Roizin    42      Executive Vice President, Finance &       
Administration
Kenneth J. Mesnik   51      Executive Vice President, Merchandising   

Alexander M.        53      Executive Vice President, Store Operations
Winiecki                                                            

Gregory B. Sweeney  46      Vice President, General Manager           
  Direct Marketing

Carol A. Lambert    47      Vice President, Human Resources           

     MICHAEL F. ANTHONY was appointed Chairman of the Board, President and Chief
Executive Officer of the Company in March 1999. He was President and Chief      
Executive Officer of the Company from September 1995 until March 1999. From     
October 1994 until September 1995, Mr. Anthony served as President and Chief    
Operating Officer of the Company. From 1989 to October 1994, he held various    
senior executive positions with Lechter's, Inc., a nationwide chain of 600      
specialty stores, including President in 1994, Executive Vice President from    
1993 to 1994 and Vice President/General Merchandise Manager from 1989 to 1993.  
From 1978 to 1989, he was with Gold Circle, which at the time was a division of 
Federated Department stores, where he held various merchandising positions,     
including Divisional Vice President/Divisional Merchandise Manager from February
1986 to 1989.                                                                   

PHILIP W. ROIZIN has been Executive Vice President, Finance and       
Administration of the Company since December 1996. From May 1995 to December    
1996, Mr. Roizin served as Chief Financial Officer of The Franklin Mint. From   
July 1989 to May 1995, he held various senior positions with Dole Food Company, 
including Vice President / General Manager of Dole Beverages and Vice President 
of Strategic Services. From 1985 to 1989, Mr. Roizin served as a consultant for 
Bain & Co., a management consulting firm.                                       

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    KENNETH J. MESNIK was appointed Executive Vice President, Merchandising in
February 2000. From December 1998 to February 2000, Mr. Mesnik was Senior Vice  
President of Merchandising for 1-800-Flowers.com. From April 1993 to November   
1998, he served as Senior Vice President for Federated Department stores. From  
January 1990 until April 1993, Mr. Mesnik was a Vice President of Merchandising 
for May Department stores.                                                      

ALEXANDER M. WINIECKI was appointed Executive Vice President, Store   
Operations in May 2000. He was Senior Vice President, Store Operations of the   
Company from March 1994 until May 2000, having previously served as Vice        
President, Store Operations of the Company beginning in October 1990. Mr.       
Winiecki was Executive Vice President of Decor Corporation, a retailer of framed
fine art prints and posters, from November 1989 until September 1990. He was    
Vice President, Administration of Claire's Boutiques, Inc., a chain of women's  
costume jewelry and accessory specialty stores, from November 1986 until October
1989. From February 1985 until November 1986, Mr. Winiecki was a Regional Vice  
President of The Ben Franklin Stores, a chain of craft and variety stores, which
was a division of Household Merchandising Inc. He was a Regional Manager of The 
Gap Stores, Inc., a specialty retailer of apparel, from May 1978 until January  
1985.                                                                           

   CAROL A. LAMBERT was appointed Vice President of Human Resources in April
2000. Prior to such time, Ms. Lambert held the position of Director of          
Compensation and Benefits for the Company from August 1996 to April 2000. From  
1990 until August 1996 she served as Senior Vice President of Human Resources   
for Home Bank where she was employed since 1979.                                

    GREGORY B. SWEENEY was appointed Vice President and General Manager of the
Direct Marketing segment in February 2001. From June 1998 to January 2001, Mr.  
Sweeney served as Vice President of Database Marketing at Office Depot, the     
world's largest office supply company. From 1981 to 1998, Mr. Sweeney was with  
L. L. Bean, a national specialty mail order company, where he held various      
positions including Director of Strategic Planning and Vice President of        
Customer Loyalty Marketing.                                                     

Each executive officer has been elected to hold office until the first
meeting of the Board of Directors following the next annual meeting of          
stockholders and until such executive officer's successor is chosen or qualified
or until such executive officer sooner dies, resigns, is removed or becomes     
disqualified.                                                                   

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PART II.                                                                        

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS'        
MATTERS.                                                      

 Stock exchange listing: The Company's common stock trades on the NASDAQ
National Market tier of The NASDAQ Stock Market under the Symbol: BKST          

Common Stock:  Fiscal 1999                          Fiscal 2000                 
Quarter  High     Low                Quarter  High    Low     
-----------------------              -----------------------  
First    $15.50  $12.00              First    $19.00  $14.94  
Second   $15.88  $13.75              Second   $17.06  $ 9.25  
Third    $17.81  $13.50              Third    $14.50  $11.75  
Fourth   $18.25  $15.56              Fourth   $14.94  $10.61  

  As of April 20, 2001, there were 8,354,772 shares of common stock, $.001
par value per share, outstanding and held of record by 166 stockholders. The    
Company has never paid a cash dividend and currently plans to retain any        
earnings for use in the operations of the business. Any determination by the    
Board of Directors to pay future cash dividends will be based upon conditions   
then existing, including the Company's earnings, financial condition and        
requirements, restrictions in its financing arrangements and other factors.     

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ITEM 6.  SELECTED FINANCIAL DATA                                                

Brookstone, Inc.  
Selected Financial Data   
(In thousands, except operating and per share data) 

                                                        [Enlarge/Download Table]

                                                                           Fiscal                          
                                                   --------------------------------------------------------
                                                       2000*      1999      1998       1997        1996    
-----------------------------------------------------------------------------------------------------------
Income Statement Data: (1)                                                                                 
                                                                                                           
Net sales                                           $  364,541 $ 326,855  $ 276,051  $ 243,662    $ 221,629
Cost of sales                                          224,968   199,569    175,381    155,952      142,368
Gross profit                                           139,573   127,286    100,670     87,710       79,261
Selling, general and administrative expenses           114,187   104,554     83,589     74,500       68,685
Income from operations                                  25,386    22,732     17,081     13,210       10,576
Interest expense, net                                      626     1,125      1,672      1,084          885
Provision for income taxes                               9,508     8,297      6,071      4,778        3,818
                                                     ------------------------------------------------------
Income before cumulative effect of                                                                         
  accounting change                                     15,252    13,310      9,338      7,348        5,783
Cumulative effect of accounting change                   (308)       ---       ---        ---         ---  
                                                     ------------------------------------------------------
Net income                                           $  14,944  $ 13,310   $  9,338   $  7,348    $   5,873
-----------------------------------------------------------------------------------------------------------
                                                        [Enlarge/Download Table]

Earnings per share - basic                                                                                 
                                                                                                           
Income before effect of accounting                    $   1.84   $  1.63     $ 1.17     $ 0.94     $   0.76
 change                                                                                                    
Cumulative effect of accounting change,                  (0.04)      ---        ---        ---          ---
                                                      -----------------------------------------------------
Net income                                            $   1.80   $  1.63     $ 1.17     $ 0.94     $   0.76
                                                      -----------------------------------------------------
Earnings per share - diluted                                                                               
Income before cumulative effect of                    $   1.80   $  1.58     $ 1.13     $ 0.91     $   0.73
 accounting change                                                                                         
Cumulative effect of accounting change                   (0.04)      ---        ---        ---          ---
                                                      -----------------------------------------------------
Net income                                            $   1.76   $  1.58     $ 1.13     $ 0.91     $   0.73
                                                      -----------------------------------------------------
Weighted average shares outstanding - basic              8,310     8,155      7,988      7,824        7,744
Weighted average shares outstanding - diluted            8,472     8,422      8,285      8,119        8,061
-----------------------------------------------------------------------------------------------------------
                                                        [Enlarge/Download Table]

Operating Data: (Unaudited)                                                                     
                                                                                                
Increase in same store sales (2)                  3.5%**      5.8%      6.0%      3.6%      5.6%
Net sales per square foot of selling space (3)  $    538   $   521    $  501    $  469  $    461
Number of stores:                                                                               
Beginning of period                                  211       196       177       159       144
Opened during period                                  14        15        24        19        16
Closed during period                                   2        --         5         1         1
End of period                                        223       211       196       177       159
Number of winter holiday seasonal stores              60        71        95       138       121

Balance Sheet Data (at period end):                                                             
Total assets                                    $159,168  $141,906  $114,561  $105,318  $ 87,261
Long-term debt, excluding current portion          2,414     2,511     2,612     2,698     2,784
Total shareholders' equity                       102,511    87,310    72,310    61,766    53,957

*Fifty-three week year **Based upon fifty-two weeks                         
(1) Effective January 30, 2000, the Company changed its revenue recognition     
  policy for catalog sales and other drop shipment sales to be in accordance
    with the provisions of Securities and Exchange Commission's Staff Accounting
 Bulletin No.101, "Revenue Recognition in Financial Statements". Under the
provision of SAB101, revenue is recognized at time of customer receipt  
instead of at time of shipment. The cumulative effect of this change for
   prior periods is $.3million, net of tax of $.2 million The pro forma effect
of SAB 101 on the net income of prior periods presented is not material.

In the fourth quarter of Fiscal 2000, the Company changed its income    
statement classification of shipping and handling fees and costs in     
 accordance with EITF 00-10, "Shipping and Handling Fees and Costs" ("EITF
00-10"). As a result of this adoption of EITF 00-10, the Company now    
reflects shipping and handling fees billed to customers as revenue while
   the related shipping and handling costs are included in cost of goods sold.
Prior to the adoption of EITF 00-10 such fees and costs were netted in  
selling, general and administrative expenses. Shipping and handling fees
and costs for all prior periods presented have been reclassified to     
conform to the new income statement presentation.                       

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(2) Same store sales percentage is calculated using net sales of stores, which  
   were open for the full current period and the entire preceding fiscal year.

(3) Net sales per square foot of selling space dollar amount is calculated using
   net sales generated for stores open for the entire fiscal period divided by
the square feet of selling space of such stores. Selling space does not 
include stock rooms.                                                    

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.                                                

RESULTS OF OPERATIONS                                                           

The following table sets forth certain financial data of the Company expressed  
as a percentage of net sales for Fiscal 2000, Fiscal 1999 and Fiscal 1998.      

                                                                [Download Table]

                                                          Fiscal Year          
                                                 2000        1999         1998 
                                                                               
Net sales                                      100.0%       100.0%       100.0%

Cost of sales                                   61.7         61.1         63.5 
                                               ------       ------       ------
Gross profit                                    38.33         8.9         36.5 

Selling, general and                                                           
   administrative expenses                      31.33         2.0         30.3 

Income from operations                           7.0          6.9          6.2 
Interest expense, net                            0.2          0.3          0.6 
                                               ------       ------       ------

Income before taxes                              6.8          6.6          5.6 
Provision for income taxes                       2.6          2.5          2.2 
                                               ------       ------       ------
Income before cumulative effect of                                             
   accounting change                             4.2          4.1          3.4 
Cumulative effect of accounting change,                                        
   net of tax                                   (0.1)          --           -- 
                                               ------       ------       ------
Net income                                       4.1%         4.1%         3.4%
                                               ------       ------       ------

ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS                                       

   During the fourth quarter of Fiscal 2000, the Company changed its revenue
recognition policy for catalog sales and other drop shipment sales in accordance
with the provisions of the Securities and Exchange Commission's Staff Accounting
Bulletin No. 101 ("SAB 101"), Revenue Recognition in Financial Statements."     
Under the provision of SAB 101, revenue is recognized at time of customer       
receipt instead of at time of shipment as the Company retains risk of loss while
the goods are in transit. The cumulative effect of this change for periods prior
to Fiscal 2000 is $.3 million, net of tax of $.2 million and is reflected in the
Company's first fiscal quarter.                                                 

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In the fourth quarter of Fiscal 2000, the Company changed its income  
statement 16 classification of shipping and handling fees and costs in          
accordance with the Emerging Issues Task Force 2000-10, "Shipping and Handling  
Fees and Costs ("EITF 00-10"). As a result of this adoption of EITF 00-10, the  
Company now reflects shipping and handling fees billed to customers as revenue  
while the related shipping and handling costs are included in cost of goods     
sold. Prior to the adoption of EITF 00-10 such fees and costs were netted in    
selling, general and administrative expenses. Shipping and handling fees and    
costs for all prior periods presented have been reclassified to conform to the  
new income statement presentation.                                              

FIFTY-THREE WEEKS ENDED FEBRUARY 3, 2001 VERSUS FIFTY-TWO WEEKS ENDED JANUARY   
29, 2000                                                                        

     Net sales for Fiscal 2000 increased by $37.7 million, or 11.5%, over Fiscal
1999, primarily as the result of a $27.7 million, or 10.2%, increase in retail  
sales, combined with a $10.0 million, or 17.8%, increase in direct marketing    
sales. Of the increase in retail sales, $9.8 million was attributable to the    
opening of 14 new stores (12 full line and 2 airport store), $8.8 million to    
additional sales from the operation of 15 stores for the full year in Fiscal    
2000 that were only open for a portion of Fiscal 1999 (14 full line and 1       
airport store), and $10.3 million is from same store sales. Offsetting this     
increase is the loss of sales of $1.2 million attributable to operating 11 less 
Holiday seasonal stores. The $10.0 million, or 17.8%, increase in direct        
marketing sales was primarily attributable to $3.9 million in sales from the    
Gardeners Eden catalog (which was acquired in May, 1999) and a $4.9 million     
increase in Internet sales. The remaining increase of $1.2 million is primarily 
the result of revenue generated from customers for shipping and handling and    
increased sales from the Hard-To-Find-Tools and Brookstone Gift Collection      
catalogs.                                                                       

     Gross profit as a percentage of net sales decreased 0.6% to 38.3% in Fiscal
2000 compared to 38.9% in Fiscal 1999. The decrease was primarily due to a 0.9% 
increase in net material costs as a percentage of net sales, resulting primarily
from sales of lower margin products in Fiscal 2000 versus Fiscal 1999. As a     
percentage of net sales, Fiscal 2000 occupancy costs decreased by 0.3% as       
compared to Fiscal 1999. The decrease in occupancy is primarily the result of   
additional sales from the Company's Direct Marketing business without any       
associated occupancy costs.                                                     

Selling, general and administrative ("SG&A") expenses increased $9.6  
million to $114.2 million in Fiscal 2000 from $104.6 million in Fiscal 1999. As 
a percent of net sales, SG&A decreased to 31.3% in Fiscal 2000 from 32.0% in    
Fiscal 1999. This $9.6 million increase included $3.5 million expended for      
operating expenses associated with new stores opened in Fiscal 2000 and stores  
open for the full year in Fiscal 2000 that were only open for a partial year in 
Fiscal 1999. Also, $3.0 million associated with marketing for the Direct        
Marketing segment, which includes the internet and full year costs for the      
Gardeners Eden catalog, which was acquired in May, 1999. Additionally, there was
a $3.1 million increase in compensation and benefits to support the base        
business and distribution center.                                               

   Income from operations was $25.4 million, or 7.0% of net sales, in Fiscal
2000 as compared to $22.7 million, or 6.9% of net sales, in Fiscal 1999.        

  Net interest expense decreased to $0.6 million, or 0.2% of net sales, in
Fiscal 2000 from $1.1 million, or 0.3% of net sales, in Fiscal 1999, primarily  
due to increased average cash balance                                           

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resulting from a higher beginning of year balance and decreased capital         
expenditures offset by 17 increased working capital in Fiscal 2000 versus Fiscal
1999. In Fiscal 2000, the Company recorded a provision for income taxes of $9.5 
million, or 2.6% of net sales, as compared to $8.3 million, or 2.5% of net      
sales, in Fiscal 1999, resulting from an increase in pre-tax income.            

     As a result of the foregoing factors, net income increased to $14.9 million
in Fiscal 2000 (after reflecting the reduction of a cumulative effect of an     
accounting change of $.3 million, net of tax) versus $13.3 million in Fiscal    
1999. Net income was 4.1% of net sales in Fiscal 2000 and Fiscal 1999. Earnings 
per share on a diluted basis increased to $1.76 in Fiscal 2000 (after reflecting
the reduction of a cumulative effect of accounting change of $0.04) from $1.58  
in Fiscal 1999.                                                                 

FIFTY-TWO WEEKS ENDED JANUARY 29, 2000 VERSUS FIFTY-TWO WEEKS ENDED JANUARY 30, 
1999                                                                            

     Net sales for Fiscal 1999 increased by $50.8 million, or 18.4%, over Fiscal
1998, primarily as the result of a $26.9 million, or 11.0%, increase in retail  
sales, combined with a $23.9 million, or 74.3%, increase in direct marketing    
sales. Of the increase in retail sales, $11.6 million was attributable to the   
opening of 15 new stores (14 full line and 1 airport store), $10.5 million to   
additional sales from the operation of 24 stores for the full year in Fiscal    
1999 that were only open for a portion of Fiscal 1998 (17 full line and 7       
airport stores), and $12.3 million from a 5.8% increase in same store sales.    
Partially offsetting such sales increases was the loss of $1.4 million in sales 
from 5 stores closed in Fiscal 1998 and $6.1 million less sales from temporary  
winter holiday locations in Fiscal 1999 and from not operating temporary summer 
locations during Fiscal 1999 that were open in Fiscal 1998. The reduced holiday 
sales from temporary locations, are primarily the result of operating 24 less   
stores during holiday season of Fiscal 1999 versus Fiscal 1998. The $23.9       
million, or 74.3%, increase in direct marketing sales was primarily attributable
to $15.1 million in sales from the Gardeners Eden catalog acquired in May 1999  
and a $3.6 million increase in Internet sales and $2.7 million in revenue       
generated from customers for shipping and handling The remaining increase of    
$2.5 million is the result of a 8.5% increase in sales primarily from a 17.7%   
increase in circulation for the Hard-To-Find-Tools and Brookstone Gift          
Collection catalogs.                                                            

     Gross profit as a percentage of net sales increased 2.4% to 38.9% in Fiscal
1999 compared to 36.5% in Fiscal 1998. The increase was primarily due to a 2.0% 
reduction in net material costs as a percentage of net sales, resulting         
primarily from lower sourcing costs, offset by 0.6% increase in shipping costs  
associated with the Direct Marketing segment. The lower sourcing costs resulted 
as the Company continued to increase the penetration of products bearing the    
Brookstone Brand. As a percentage of net sales, Fiscal 1999 occupancy costs     
decreased by 1.0% as compared to Fiscal 1998. The decrease in occupancy is      
primarily the result of additional sales from the Company's Direct Marketing    
business without any associated occupancy costs and the strong increase in same 
store sales.                                                                    

Selling, general and administrative ("SG&A") expenses increased $21.0 
million to $104.6 million in Fiscal 1999 from $83.6 million in Fiscal 1998. As a
percent of net sales, SG&A rose to 32.0% in Fiscal 1999 from 30.3% in Fiscal    
1998. This $21.0 million increase included $7.8 million associated with the     
acquisition and operation of the Gardeners Eden catalog, $1.5 million associated
with catalog costs as a result of increased circulation and $1.2 million        
associated with                                                                 

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Internet operating costs. Additionally, $4.4 million was expended for operating 
expenses associated with new stores opened in Fiscal 1999 and stores open for   
the full year in Fiscal 1999 18 that were only open for a partial year in Fiscal
1998, there was a $5.1 million increase in compensation and benefits to support 
the base business and distribution center and $1.0 million associated with      
upgrading and modifying systems as part of Y2k remediation efforts.             

   Income from operations was $22.7 million, or 7.0% of net sales, in Fiscal
1999 versus $17.1 million, or 6.2% of net sales, in Fiscal 1998.                

  Net interest expense decreased to $1.1 million, or 0.3% of net sales, in
Fiscal 1999 from $1.7 million, or 0.6% of net sales, in Fiscal 1998, primarily  
due to refinement of inventory management coupled with a strong operating       
performance. In Fiscal 1999, the Company recorded a provision for income taxes  
of $8.3 million, or 2.5% of net sales, as compared to $6.1 million, or 2.2% of  
net sales, in Fiscal 1998, resulting from an increase in pre-tax income offset  
by a reduction in the effective tax rate.                                       

     As a result of the foregoing factors, net income increased to $13.3 million
in Fiscal 1999 versus $9.3 million in Fiscal 1998. Net income was 4.1% and 3.4% 
of net sales in Fiscal 1999 and Fiscal 1998, respectively. Earnings per share on
a diluted basis increased to $1.58 in Fiscal 1999 from $1.13 in Fiscal 1998.    

SEASONALITY                                                                     

    The seasonal nature of the Company's business increased in Fiscal 2000 and
is expected to continue to increase in Fiscal 2001 as the Company opens         
additional retail stores and continues its program to operate a significant     
number of small, temporary locations during the winter holiday selling season.  
In Fiscal 2000, most of the Company's new stores were opened in the second half 
of the fiscal year.                                                             

    The Company's sales in the second fiscal quarter are generally higher than
sales during the first and third quarters as a result of sales in connection    
with Father's Day. The fourth fiscal quarter, which includes the winter holiday 
selling season, has historically produced a disproportionate amount of the      
Company's net sales and all of its income from operations.                      

LIQUIDITY AND CAPITAL RESOURCES                                                 

    During Fiscal 2000, the Company generated a total of $24.4 million of cash
including $24.1 million from operations and $0.3 million from the exercise of   
stock options and related tax benefits. In addition, the Company's working      
capital increased approximately $11.7 million principally from increased        
inventory as compared to Fiscal 1998. The Company applied $8.5 million to fund  
capital expenditures. The capital expenditures included $3.3 million for new    
stores, $3.2 million for remodeling and maintenance in existing stores, $1.4    
million for information systems developments and $0.6 million for distribution  
center and infrastructure improvements. The Company's cash position increased   
$4.0 million from the end of the prior fiscal year, with total cash on hand     
amounting to $35.4 million.                                                     

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    During Fiscal 1999, the Company generated a total of $25.8 million of cash
including $24.1 million from operations and $1.7 million from the exercise of   
stock options and related tax benefits. In addition, the Company's working      
capital decreased approximately $7.5 million principally from income and sales  
taxes payable and compensation liability as compared to Fiscal 1998. The Company
applied $9.6 million to acquire the Gardeners Eden catalog and $9.7 million to  
fund capital expenditures. The capital expenditures included $3.7 million for   
new stores, $4.7 million for remodeling and maintenance in existing stores, $0.9
million for information systems developments and $0.4 million for distribution  
center and infrastructure improvements. The Company's cash position increased   
$14.0 million from the end of the prior fiscal year, with total cash on hand    
amounting to $31.4 million.                                                     

The Company's primary short-term liquidity needs consist of financing 
seasonal merchandise inventory build-ups. The Company's primary sources of      
financing for such needs are from operations, borrowings under its revolving    
credit facility and trade credit. The Company's borrowings under the revolving  
credit facility are typically at low levels from January through April,         
increases through May as inventory is increased in anticipation of Father's Day,
declines in June, increases somewhat through August and sharply increases from  
September through November to finance purchases of merchandise inventory in     
advance of the winter holiday selling season. The Company generally repays all  
outstanding borrowings under its revolving credit facility prior to Christmas   
and relies on cash from operations obtained during the winter holiday selling   
season until it begins to borrow again under its revolving credit facility the  
following fiscal year. At February 3, 2001, the Company had no outstanding      
borrowings under its revolving credit facility, although certain letters of     
credit in an aggregate amount of approximately $8.1 million were outstanding.   
During Fiscal 2000, the Company borrowed a maximum amount of $35.8 million under
the revolving credit facility.                                                  

  The Company's revolving credit facility provides for borrowings of up to
$75 million for letters of credit and working capital, as long as the Company   
meets a borrowing base test equal to 50% of the amount of eligible inventory and
outstanding documentary letters of credit (increasing to 65% June through July  
and to 75% August through November). Amounts available for borrowings are       
reduced by the aggregate amount of outstanding letters of credit, which may not 
exceed $40 million, and borrowings. The revolving credit agreement requires the 
Company to have no more than $10 million in borrowings (excluding letters of    
credit) outstanding for one 30 consecutive day period during the December 15 to 
April 30 period. Borrowings outstanding under this facility bear interest, at   
the election by the Company, equal to the agent bank's base lending rate or the 
Eurodollar rate for the applicable period plus an additional 1.0%, 1.25% or 1.5%
depending on the applicable cash flow coverage ratio (at February 3, 2001 the   
rate was 6.56% and was 7.03% at January 29, 2000). In addition, the Company is  
obligated to pay a fee of 0.25% or 0.30% on the unused portion of the commitment
and 0.50%, 0.625% or 0.75% on documentary letters of credit (depending on the   
applicable cash flow coverage ratio). The facility expires July 31, 2002. At the
Lender's option, all positive cash balances held by the lender banks may be     
applied to the outstanding balance of the revolving line of credit. The         
revolving credit agreement contains a number of restrictive covenants, including
limitations on incurring additional indebtedness, granting liens, selling       
assets, engaging in mergers and other similar transactions, engaging in new     
business lines and                                                              

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making capital expenditures. In addition, the agreement prohibits the paying of 
cash dividends on common stock and requires that the Company maintain certain   
financial ratios, including tests pertaining to net worth, ratio of liabilities 
to net worth and cash flow coverage. During the year ended, and as of, February 
3, 2001, the Company was in compliance with these covenants.                    

  The Company has never paid a cash dividend and currently plans to retain
any earnings for use in the operations of the business. Any determination by the
Board of Directors to pay future cash dividends will be based upon conditions   
then existing, including the Company's earnings, financial condition and        
requirements, restrictions in its financing arrangements and other factors.     

FISCAL 2001 STORE OPENINGS AND CAPITAL EXPENDITURE EXPECTATIONS                 

 The following discussion includes certain forward-looking statements of
management's expectations for store growth and related capital expenditures.    
These statements should be read in light of the considerations presented under  
the caption Outlook: Important Factors and Uncertainties (found on pages 22 - 24
of this document).                                                              

  The Company expects to add approximately 15 to 20 new Brookstone stores,
including up to five airport locations and open as many as three Gardeners Eden 
retail stores, in Fiscal 2001. The Company anticipates the cost of opening a new
Brookstone store, including leasehold improvements (net of landlord allowances),
furniture and fixtures, and pre-opening expenses, to average approximately      
$375,000. In addition, the Company expects new stores to require $150,000 of    
working capital per store. The Company anticipates the cost of opening airport  
stores, including leasehold improvements, furniture and fixtures, and pre-      
opening expenses, to average approximately $250,000, and expects airport stores 
to require $100,000 of working capital per store. The Company expects to        
identify approximately 10 stores for remodeling, and update and maintain other  
stores, during Fiscal 2001, incurring capital expenditures of approximately $5.0
million. The Company plans to operate approximately 60 seasonal stores during   
the Fiscal 2001 winter holiday season subject to the availability of acceptable 
sites. In addition to the capital expenditures listed above, the Company        
anticipates making capital expenditures of approximately $8.0 million in Fiscal 
2001, primarily to enhance the Company's management information, distribution   
and other support systems.                                                      

   In Fiscal 2001, the Company expects to open most of its new stores in the
second half of the year. The Company's retail operations are not generally      
profitable until the fourth quarter of each fiscal year.                        

 The Company believes its cash balances, funds to be generated by future
operations and borrowing capacity will be sufficient to finance its capital     
requirements during Fiscal 2001.                                                

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OUTLOOK: IMPORTANT FACTORS AND UNCERTAINTIES                                    

     The Private Securities Litigation Reform Act of 1995 (the "Act") provides a
"safe harbor" for forward-looking statements to encourage companies to provide  
prospective information about themselves without fear of litigation so long as  
the forward-looking information is accompanied by meaningful cautionary         
statements identifying important factors that could cause actual results to     
differ materially from those set forth in the forward-looking statement.        
Statements in this 2000 Annual Report on Form 10-K which are not historical     
facts, including statements about the Company's or management's confidence or   
expectations, seasonality of the Company's future sales and earnings, plans for 
opening new stores and other retail locations, introduction of new or updated   
products, opportunities for sales growth or cost reductions and other statements
about the Company's operational outlook, are forward-looking statements subject 
to risks and uncertainties that could cause actual results to vary materially.  
The following are important factors, among others, that should be considered in 
evaluating these forward-looking statements, as well as in evaluating the       
Company's business prospects generally:                                         

   Concentration of Sales in Winter Holiday Season. A high percentage of the
  Company's annual sales and all or substantially all of its annual income
   from operations have historically been attributable to the winter holiday
 selling season. In addition, like many retailers, the Company must make
     merchandising and inventory decisions for the winter holiday selling season
well in advance of actual sales. Accordingly, unfavorable economic    
     conditions and/or deviations from projected demand for products during this
 season could have a material adverse effect on the Company's results of
operations for the entire fiscal year. While the Company anticipates  
     implementing certain measures to improve its results during periods outside
of the winter holiday selling season, such as the opening of stores in
    airports and the development of Gardeners Eden stores, the Company expects
that its annual results of operations will remain dependent on the    
Company's performance during the winter holiday selling season.       

  Dependence on Innovative Merchandising. Successful implementation of the
   Company's merchandising strategy depends on its ability to introduce in a
   timely manner new or updated products which are affordable, functional in
  purpose, distinctive in quality and design and not widely available from
     other retailers. If the Company's products or substitutes for such products
    become widely available from other retailers (especially department stores
or discount retailers), demand for these products from the Company may
 decline or the Company may be required to reduce their retail prices. A
decline in the demand for, or a reduction in the retail prices of, the
Company's important existing products can cause fluctuations in the   
    Company's sales and profitability if the Company is unable to introduce in
  a timely fashion new or replacement products of similar sales levels and
profitability.                                                        

New Stores and Temporary Locations. The Company's ability to open new 
stores, including airport locations and the new Gardeners Eden concept
    stores, and to operate its temporary location program successfully depends
   upon, among other things, the Company's capital resources and its ability
to locate suitable sites, negotiate favorable                         

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rents and other lease terms and implement its operational strategy. In
     addition, because the Company's store designs must evolve over time so that
  the Company may effectively compete for customers in top malls, airports
   and other retail locations, actual store-related capital expenditures may
 vary from historical levels (and projections based thereon) due to such
     factors as the scope of remodeling projects, general increases in the costs
of labor and materials and unusual product display requirements.      
     Competition. The Company faces intense competition for customers, personnel
and innovative products. This competition comes primarily from other  
specialty retailers, department stores, discount retailers and direct 
     marketers, including Internet sites. Many of the Company's competitors have
 substantially greater financial, marketing and other resources than the
Company.                                                              

  Retention of Qualified Employees. The Company's success depends upon its
   ability to attract and retain highly skilled and motivated, full-time and
temporary associates with appropriate retail experience to work in    
     management and in its stores and temporary locations. Because of the robust
   U.S. economy and resulting low unemployment, it has become more difficult
 to locate and hire suitable associates. Further, because of the limited
time periods during which temporary locations are open each year, the 
availability of suitable associates for such locations is limited.    

    Seasonal Fluctuation of Operating Results. The Company's quarterly results
     of operations fluctuate based upon such factors as the amount and timing of
sales contributed by new stores, the success of its temporary location
program, capital expenditures and the timing of catalog mailings and  
associated expenses.                                                  

Centralized Distribution. The Company conducts all of its distribution
 operations and a significant portion of its direct marketing processing
functions from a multiple facilities in Mexico, Missouri and through  
Cyberian Outpost, Inc. for its Internet operation. A disruption in    
operations at the distribution center may significantly increase the  
   Company's distribution costs and prevent goods from flowing to stores and
customers.                                                            

Direct Marketing Costs. Increases in the costs of printing and mailing
 catalogs could have an adverse effect on the Company's direct marketing
business.                                                             

    Dependence on Key Vendors. Because the Company strives to sell only unique
merchandise, adequate substitutes for certain key products may not be 
widely available in the marketplace. Because of this, there can be no 
   assurance that vendor manufacturing or distribution problems, or the loss
   of the Company's exclusive rights to distribute important products, would
not have a material adverse effect on the Company's performance.      

 Foreign Vendors. The Company is purchasing an increasing portion of its
     merchandise from foreign vendors. Although management expects this strategy
  to increase profit margins for these products, the Company's reliance on
such vendors subjects the                                             

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Company to associated legal, social, political and economic risks,    
    including import, licensing and trade restrictions. In addition, while the
shortage of cargo containers used to transport goods from Asia to the 
   United States experienced in recent years has eased somewhat, the Company
     remains vulnerable should such shortages reemerge. In such a situation, the
Company could face inventory shortages in certain products, increased 
   transportation costs and increased interest expense as a result of moving
inventory receipts forward.                                           

Increased Petroleum Prices. Recent increases in petroleum prices have 
  resulted in increased transportation and shipping costs for the Company.
Further increases in petroleum prices, or failure of such prices to   
    decline, could continue to increase the Company's costs for transportation
and shipping and also cause increases in the cost of goods that are   
manufactured from plastics and other petroleum-based products.        

    Increased Reliance on E-Commerce. As a greater proportion of the Company's
    sales begin to be made via the Internet, and as the Company begins to look
 more to that channel to increase overall sales, the Company will become
   more subject to the uncertainties inherent in the quickly developing area
of e-commerce. Such uncertainties include, but are not limited to, the
  extent to which the Company's customers will adopt the Internet as their
   method of purchase, the effect that government regulation of the Internet
     (or lack thereof) will have on the Internet as a medium of commerce and the
Company's continued relationship with its Internet provider Cyberian  
 Outpost ("Outpost"). In April 2001, Outpost issued a press release with
    respect to its Fiscal 2001 results. Outpost commented in this release that
is was experiencing difficulty in obtaining required working capital  
    financing. The Company is continuing to conduct business with Outpost on a
cash basis and is exploring other business alternatives.              

NEW ACCOUNTING PRONOUNCEMENTS                                                   

 In June 1998, the Financial Accounting Standards Board issued statement
No. 133 ("SFAS No. 133"), "Accounting for Derivative Instruments and Hedging    
Activities," which establishes accounting and reporting standards for derivative
instruments, including derivative instruments embedded in other contracts,      
collectively referred to as derivatives, and for hedging activities. The Company
will adopt SFAS No. 133 as required by SFAS No.137, "Deferral of the Effective  
Date of the FASB Statement No. 133," in fiscal year 2001. To date the Company   
has not utilized derivative instruments or hedging activities and, therefore,   
the adoption of SFAS 133 is not expected to have a material impact on our       
financial position or results of operations.                                    

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ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.                           

The financial statements, together with the report thereon of         
PricewaterhouseCoopers LLP, dated March 16, 2001, and supplementary data appear 
on pages 27 through 51 of this document.                                        

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND        
FINANCIAL DISCLOSURE.                                         

None.                                                                 

PART III.                                                                       

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.                    

Information in response to this item with respect to directors of the 
Company may be found in the sections entitled "Election of Directors" and       
"Timeliness of Certain SEC filings" of the Company's definitive Proxy Statement 
for the Company's 2001 Annual Meeting of Stockholders (the "Proxy Statement"),  
and such information is incorporated herein by reference.                       

    Information in response to this item with respect to executive officers of
the Company appears in Item 4A entitled "Executive Officers of the Registrant"  
on pages 12 through 13 of this report, and such information is incorporated     
herein by reference.                                                            

ITEM 11. EXECUTIVE COMPENSATION.                                                

Information in response to this item may be found in the sections     
entitled "Board of Directors Committees" and "Compensation of Executive         
Officers" of the Proxy Statement, and such information is incorporated herein by
reference.                                                                      

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.        

   Information in response to this item may be found in the section entitled
"Security Ownership of Certain Beneficial Owners and Management" of the Proxy   
Statement, and such information is incorporated herein by reference.            

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.                        

   Information in response to this item may be found in the section entitled
"Certain Relationships and Related Transactions" of the Proxy Statement, and    
such information is incorporated herein by reference.                           

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PART IV.                                                                        

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.       

(a)  List of Financial Statements, Financial Statement Schedules, and Exhibits. 

1.   FINANCIAL STATEMENTS                                                       

  The financial statements appear on the following pages of this document.

                                                        [Enlarge/Download Table]

                                                                               Page in
                                                                               Report 
                                                                               -------
                                                                                      
Report of Independent Accountants                                                27   

Consolidated balance sheet as of February 3, 2001 and January 29, 2000           28   

Consolidated statement of income for the years ended February 3, 2001                 
January 29, 2000 and January 30, 1999                                            29   

Consolidated statement of cash flows for the years ended February 3, 2001,            
January 29, 2000 and January 30, 1999                                            30   

Consolidated statement of changes in shareholders' equity for the years ended         
February 3, 2001, January 29, 2000, and January 30, 1999                         31   

Notes to Consolidated Financial Statements                                       32   

                                                                              26

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REPORT OF INDEPENDENT ACCOUNTANTS                                               

To the Board of Directors and                                                   
Shareholders of Brookstone, Inc.                                                

In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of       
Brookstone, Inc. and its subsidiaries at February 3, 2001 and January 29, 2000, 
and the results of their operations and their cash flows for each of the three  
years in the period ended February 3, 2001, in conformity with accounting       
principles generally accepted in the United States of America. In addition, in  
our opinion, the financial statement schedules listed in the accompanying index 
present fairly, in all material respects, the information set forth therein when
read in conjunction with the related consolidated financial statements. These   
financial statements and financial statement schedules are the responsibility of
the Company's management; our responsibility is to express an opinion on these  
financial statements and financial statement schedules based on our audits. We  
conducted our audits of these statements in accordance with auditing standards  
generally accepted in the United States, which require that we plan and perform 
the audit to obtain reasonable assurance about whether the financial statements 
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,    
assessing the accounting principles used and significant estimates made by      
management, and evaluating the overall financial statement presentation. We     
believe that our audits provide a reasonable basis for the opinion expressed    
above.                                                                          

As discussed in Note 2 to the consolidated financial statements, the Company    
changed its method of accounting for revenue recognition in accordance with the 
provisions of the Securities and Exchange Commission's Staff Accounting Bulletin
No. 101, "Revenue Recognition in Financial Statements".                         

/s/ PricewaterhouseCoopers LLP                                                  
------------------------------                                                  
PRICEWATERHOUSECOOPERS LLP                                                      

Boston, Massachusetts                                                           
March 16, 2001                                                                  

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BROOKSTONE, INC.  

CONSOLIDATED BALANCE SHEET  
(In thousands, except share data) 

                               February 3, 2001       January 29, 2000
                               ----------------       ----------------
Assets                                                                          
Current assets:                                                                 
Cash and cash equivalents              $   35,397             $  31,389         
Receivables, less allowances of                                                 
$606 at February 3,                                                           
2001 and $325 at January 29, 2000          7,477                 5,425        
Merchandise inventories                   55,059                43,639        
Deferred income                            3,633                 2,561        
taxes, net                                                                    
Other current assets                       4,030                 4,572        
                              ----------             ---------
Total current assets                   105,596                87,586      

Deferred income taxes, net                  3,662                 3,806         
Property and equipment, net                41,956                43,074         
Intangible assets, net                      5,359                 5,906         
Other assets                                2,595                 1,534         
                              ----------             ---------
                              $  159,168             $ 141,906
                              ==========             =========

Liabilities and Shareholders' Equity                                            
Current liabilities:                                                            
Accounts payable                      $   13,522             $  15,759        
Other current liabilities                 28,966                25,530        
                              ----------             ---------
Total current liabilities               42,488                41,289      
Other long term liabilities                11,755                10,796         
Long term obligation under                  2,414                 2,511         
capital lease                                                                 

Commitments and contingencies (Note 11)                                         

Shareholders' equity:                                                           
Preferred stock, $0.001 par value:                                            
Authorized - 2,000,000 shares;                                            
0 shares issued and outstanding -                                         
at February 3, 2001 and                                                   
January 29, 2000                                                          
Common stock, $0.001 par value:                                               
Authorized-50,000,000 shares;                                             
issued and outstanding -                                                  
8,320,640 shares at February 3,                                           
2001 and 8,296,890 shares at                                              
January 29, 2000                             8                     8      
Additional paid-in capital                 50,277                50,020         
Retained earnings                        52,273                37,329       
Treasury stock, at cost - 3,616                                                 
shares at February 3, 2001 and                                              
January 29, 2000                            (47)                  (47)      
                              ----------             ---------
Total shareholders' equity              102,511                87,310       
                              ==========             =========
                              $  159,168             $ 141,906
                              ==========             =========
See Notes to Consolidated Financial Statements                                  

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BROOKSTONE, INC.  

CONSOLIDATED STATEMENT OF INCOME  
(In thousands, except per share data) 

                                                        [Enlarge/Download Table]

                                                                   Year Ended                        
                                           ----------------------------------------------------------
                                           February 3, 2001    January 29, 2000      January 30, 1999
                                           ----------------    ----------------      ----------------
                                                                                                     
Net sales                                  $    364,541        $      326,855        $      276,051  
Cost of sales                                   224,968               199,569               175,381  
                                           ------------        --------------        --------------  
Gross profit                                    139,573               127,286               100,670  

Selling, general and administrative                                                                  
  Expenses                                      114,187               104,554                83,589  
                                           ------------        --------------        --------------  
  Income from operations                         25,386                22,732                17,081  

Interest expense, net                               626                 1,125                 1,672  
                                           ------------        --------------        --------------  
Income before taxes and cumulative                                                                   
  effect of accounting change                    24,760                21,607                15,409  

  Income tax provision                            9,508                 8,297                 6,071  
                                           ------------        --------------        --------------  
  Income before cumulative effect of                                                                 
   accounting change                             15,252                13,310                 9,338  

  Cumulative effect of accounting change,                                                            
   net of tax of $193                              (308)                  ---                   ---  
                                           ------------        --------------        --------------  
  Net income                               $     14,944        $       13,310        $        9,338  
                                           ============        ==============        ==============  

Earnings per share - basic                                                                           

  Income before cumulative effect of                                                                 
   accounting change                       $       1.84        $         1.63        $         1.17  

  Cumulative effect of accounting change          (0.04)                  ---                   ---  
                                           ------------        --------------        --------------  
  Net income                               $       1.80        $         1.63        $         1.17  
                                           ============        ==============        ==============  

Earnings per share - diluted                                                                         

  Income before cumulative effect of                                                                 
   accounting change                       $       1.80        $         1.58        $         1.13  

   Cumulative effect of accounting change         (0.04)                  ---                   ---  
                                           ------------        --------------        --------------  
   Net income                              $       1.76        $         1.58        $         1.13  
                                           ============        ==============        ==============  

   Weighted average shares outstanding                                                               
    - basic                                       8,310                 8,155                 7,988  
                                           ============        ==============        ==============  
   Weighted average shares outstanding                                                               
    - diluted                                     8,472                 8,422                 8,285  
                                           ============        ==============        ==============  

See Notes to Consolidated Financial Statements  

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BROOKSTONE, INC.  

CONSOLIDATED STATEMENT OF CASH FLOWS  
(In thousands)  

                                                        [Enlarge/Download Table]

                                                                     Year Ended                       
                                              --------------------------------------------------------
                                              February 3, 2001    January 29, 2000    January 30, 1999
                                              ----------------    ----------------    ----------------
                                                                                                      
Cash flows from operating activities:                                                                 
Net income                                        $   14,944         $    13,310          $     9,338 

Adjustments to reconcile net income to net                                                            
 cash provided by operating activities:                                                               

Depreciation and amortization                         10,187               9,144                7,792 
Amortization of debt issuance costs                      158                 154                  143 
Deferred income taxes                                  (928)                (549)                 297 
(Increase) Decrease in other assets                  (1,219)               1,240                 (377)
Increase in other long term liabilities                  959                 834                  150 

Changes in working capital:                                                                           
Accounts receivable, net                              (2,052)                831                 (724)
Merchandise inventories                              (11,420)             (3,792)                (159)
Other current assets                                     542                (343)              (3,668)
Accounts payable                                      (2,237)              5,032               (3,713)
Other current liabilities                              3,436               5,849                2,349 
                                                  ----------         -----------          ----------- 
Net cash provided by operating activities             12,370              31,710               11,428 

Cash flows from investing activities:                                                                 
 Expenditures for Gardeners Eden acquisition             ---              (9,616)                 --- 
 Expenditures for property and equipment              (8,522)             (9,684)             (12,062)
                                                  ----------         -----------          ----------- 
Net cash used for investing activities                (8,522)            (19,300)             (12,062)
Cash flows from financing activities:                                                                 
 Payments for capitalized lease                          (97)               (102)                 (87)
 Proceeds from exercise of stock options,                                                             
 employee stock purchase plan                                                                         
 and related tax benefits                                257               1,690                1,206 
                                                  ----------         -----------          ----------- 
Net cash provided by financing activities                160               1,588                1,119 
                                                  ----------         -----------          ----------- 
Net increase in cash and cash equivalents              4,008              13,998                  485 

Cash and cash equivalents at beginning of period      31,389              17,391               16,906 
                                                  ----------         -----------          ----------- 
Cash and cash equivalents at end of period        $   35,397         $    31,389          $    17,391 
                                                  ==========         ===========          =========== 
Supplemental disclosures of cash flow information:                                                    
Cash paid for interest                            $      784         $       706          $       917 
Cash paid for income taxes                        $    9,066         $     5,901          $     5,737 

See Notes to Consolidated Financial Statements  

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BROOKSTONE, INC.  

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY 
For the years ended January 30, 1999, January 29, 2000 and February 3, 2001 
(In thousands, except share data) 

                                                        [Enlarge/Download Table]

                                                             Additional                                        Total        
                                                  Common       Paid-In        Retained        Treasury      Shareholders'   
                                   Shares         Stock        Capital        Earnings         Stock          Equity        
                                -----------     ---------- -------------    ------------    ------------  ----------------- 
                                                                                                                            
Balance at January 31, 1998      7,871,384           8         47,124          14,681           (47)            61,766      
   Issuance of common stock                                                                                                 
        under employee stock                                                                                                
          purchase plan             17,102                        178                                              178      
   Options exercised including                                                                                              
     related tax benefit           176,100                      1,028                                            1,028      
   Net income                                                                   9,338                            9,338      
                                --------------------------------------------------------------------------------------------
Balance at January 30, 1999      8,064,586           8         48,330          24,019           (47)            72,310      
   Options exercised including                                                                                              
     related tax benefit           232,304                      1,690                                            1,690      
   Net income                                                                  13,310                           13,310      
                                --------------------------------------------------------------------------------------------
Balance at January 29, 2000      8,296,890        $  8       $ 50,020        $ 37,329        $  (47)         $  87,310      
   Options exercised including                                                                                              
     related tax benefit            23,750                        257                                              257      
   Net income                                                                  14,944                           14,944      
                                --------------------------------------------------------------------------------------------
Balance at February 3, 2001      8,320,640        $  8       $ 50,277        $ 52,273        $  (47)         $ 102,511      
                                --------------------------------------------------------------------------------------------

See Notes to Consolidated Financial Statements  

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                      

1. NATURE OF BUSINESS AND ORGANIZATION                                          

  Brookstone, Inc. (the "Company") is a nationwide specialty retailer that
offers an assortment of consumer products that are functional in purpose,       
distinctive in quality and design and not widely available from other retailers.
The Company sells its products nationally through 223 retail stores in 38       
states, the District of Columbia and Puerto Rico, temporary stores typically    
operated during the winter holiday season and direct marketing vehicles         
including its Hard-to-Find Tools, Brookstone Gift Collection and Gardeners Eden 
catalogs and the Internet. The Company's merchandise includes lawn and garden,  
health and fitness, home and office and travel and auto products.               

The Company's fiscal year end is the Saturday nearest the last day in 
January. Results of operations for Fiscal 2000 are for the 53 weeks ended       
February 3, 2001. Results for Fiscal 1999 are for the 52 weeks ended January 29,
2000, and results for Fiscal 1998 are for the 52 weeks ended January 30, 1999.  

2. SIGNIFICANT ACCOUNTING POLICIES                                              

Principals of Consolidation                                                     

    The accompanying consolidated financial statements include the accounts of
the Company and Brookstone Company, Inc., its wholly owned subsidiary and the   
direct and indirect wholly owned subsidiaries of Brookstone Company, Inc.       
(Brookstone Stores, Inc., Brookstone Purchasing, Inc., Brookstone Properties,   
Inc., Brookstone By Mail, Inc., Fork Distribution Corporation, Gardeners Eden By
Mail, Inc., Brookstone Retail Puerto Rico, Inc., Brookstone Holdings, Inc. and  
Brookstone O'Hare LLC). All significant intercompany accounts and transactions  
have been eliminated in consolidation.                                          

Cash and Cash Equivalents                                                       

  The Company considers all highly liquid investment instruments purchased
with a remaining maturity of three months or less to be cash equivalents. These 
instruments are carried at cost plus accrued interest. The Company invests its  
excess cash in money market funds and commercial paper with institutions with   
strong credit ratings. These investments are subject to minimal credit and      
market risk.                                                                    

Fair Value of Financial Instruments                                             

   The recorded amounts for cash and cash equivalents, other current assets,
accounts receivable, accounts payable and other current liabilities approximate 
fair value due to the short-term nature of these financial instruments.         

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Use of Estimates                                                                

The preparation of financial statements in conformity with generally  
accepted accounting principles requires management to make estimates and        
assumptions that affect the reported amounts of assets and liabilities and      
disclosure of contingent assets and liabilities at the date of the financial    
statements and the reported amounts of revenues and expenses during the         
reporting period. Actual results may differ from those estimates.               

Merchandise Inventories                                                         

    Merchandise inventories are stated at the lower of cost or market. Cost is
determined using the weighted average cost method. In addition to the cost of   
merchandise purchased, certain costs related to the purchasing, storage and     
handling of merchandise are included in inventory.                              

Property and Equipment                                                          

   Property and equipment are recorded at cost. Expenditures for maintenance
and repairs of minor items are charged to expense as incurred. Depreciation and 
amortization of property and equipment (excluding temporary locations) are      
determined using the straight-line method over the estimated useful lives shown 
below. Materials used in the construction of temporary locations such as kiosks 
are depreciated based on usage over a maximum five-year period and are included 
in equipment and fixtures.                                                      

Equipment, furniture and fixtures    3 to 10 years          
     Leasehold improvements               The lesser of the lease term
                                          or the estimated useful life

     The Company leases retail store locations under operating lease agreements,
which sometimes provide for leasehold completion allowances to be received from 
the lessors. These allowances are recorded against the cost of leasehold        
improvements related to individual retail store locations.                      

Advertising Costs                                                               

    Direct response advertising costs, which consist of catalog production and
postage costs, are deferred and amortized over the period of expected direct    
marketing revenue, which is less than one year. Deferred costs were $2.1 million
and $1.3 million at February 3, 2001 and January 29, 2000, respectively and are 
classified as non-current assets. The Company expenses in-store and print       
advertising costs as incurred. Advertising expense was approximately $22.3      
million, $18.2 million and $11.6 million for the years ended February 3, 2001,  
January 29, 2000 and January 30, 1999, respectively.                            

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Intangible Assets                                                               

    Intangible assets include trade name and customer lists. Intangible assets
are amortized on the straight -line basis over the estimated useful lives       
ranging from 3 years to 20 years.                                               

Impairment of Long-Lived Assets                                                 

 The Company reviews long-lived assets for impairment whenever events or
changes in business circumstances indicate that the carrying amount of the      
assets may not be fully recoverable or that the useful lives of these assets are
no longer appropriate. Each impairment test is based on a comparison of the     
undiscounted cash flows to the recorded value of the asset. If impairment is    
indicated, the asset is written down to its estimated fair value on a discounted
cash flow basis.                                                                

Revenue Recognition                                                             

 The Company recognizes revenue from sales of merchandise at the time of
sale in its stores, or at the time of customer receipt for direct marketing     
sales. Revenue is recognized net of actual merchandise returns and allowances.  
Revenue from merchandise credits and gift certificates is deferred until        
redemption.                                                                     

The Company allows merchandise returns for all merchandise, and has   
established an allowance for merchandise returns based on historical experience,
in accordance with SFAS No.48. The returns allowance is recorded as a reduction 
to net sales.                                                                   

In the fourth quarter of Fiscal 2000, the Company changed its income  
statement classification of shipping and handling fees and costs in accordance  
with the Emerging Issues Task Force 2000-10, "Shipping and Handling Fees and    
Costs" ("EITF 00-10"). As a result of this adoption of EITF 00-10, the Company  
now reflects shipping and handling fees billed to customers as revenue while the
related shipping and handling costs are included in cost of goods sold. Prior to
the adoption of EITF 00-10 such fees and costs were netted in selling, general  
and administrative expenses. Shipping and handling fees and costs for all prior 
periods presented have been classified to conform to the new income statement   
presentation.                                                                   

Store Closings                                                                  

 The Company continually assesses the operating financial results of its
retail stores. As a result of this assessment, management may decide to remodel 
or phase out and close certain stores. When such determinations are made, a     
provision for store closing costs is recorded in the Statement of Income.       

                                                                              34

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Employee Benefit Programs                                                       

The Company accounts for post-retirement benefits in accordance with  
Statement of Financial Accounting Standards No. 106, "Employers' Accounting for 
Post-Retirement Benefits Other Than Pension" (FAS 106). FAS 106 requires the    
recognition of a liability for post-retirement benefits as earned during an     
employee's years of service.                                                    

   The Company accounts for pension benefits in accordance with Statement of
Financial Accounting Standards No. 87, "Employers' Accounting for Pensions" (FAS
87). Pension expense is determined using the projected unit credit actuarial    
cost method.                                                                    

Statement of Financial Accounting Standards No. 132, "Employers'      
Disclosures about Pensions and Other Post-Retirement Benefits" (FAS 132), issued
in February 1998, amends both FAS 106 and FAS 87, by standardizing disclosure   
requirements, requiring additional information on changes in benefit obligations
and fair value of plan assets, and eliminating certain disclosures. The Company 
adopted this statement for the fiscal year ended January 30, 1999.              

Income Taxes                                                                    

The Company accounts for income taxes under Statement of Financial    
Accounting Standards No. 109, "Accounting for Income Taxes," ("SFAS 109"). Under
the asset and liability method of SFAS 109, deferred tax assets and liabilities 
are recognized for the future tax consequences attributable to differences      
between the financial statement carrying amounts of existing assets and         
liabilities and their respective tax bases. Deferred tax assets and liabilities 
are measured using enacted tax rates expected to be applied to taxable income in
the fiscal year in which those temporary differences are expected to be         
recovered or settled. The effect of any future change in tax rates is recognized
in the period in which the change occurs.                                       

Earnings Per Share                                                              

    Earnings per share are presented in accordance with Statement of Financial
Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128") which requires  
the presentation of "basic" earnings per share and "diluted" earnings per share.
Basic earnings per share is computed by dividing income available to common     
shareholders by the weighted-average shares of common stock outstanding during  
the period. For the purposes of calculating diluted earnings per share, the     
denominator includes both the weighted average number of shares of common stock 
outstanding during the period and the weighted average number of potential      
common stock, such as stock options.                                            

Segment Reporting                                                               

     The Company presents its financial information in accordance with Statement
of Financial Accounting Standards No. 131, "Disclosures about Segments of an    
Enterprise and Related Information" ("SFAS 131"). Under SFAS 131, the Company's 
business is comprised of two distinct business segments determined by the method
of distribution channel. The retail                                             

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segment is comprised of all full-year stores in addition to all temporary stores
and kiosks. Retail product distribution is conducted directly through the store 
location. The direct marketing segment is comprised of the Hard-to-Find-Tools,  
Brookstone Gift Collection and Gardeners Eden catalogs and products promoted via
the Internet site www.Brookstone.com. Direct marketing product distribution is  
conducted through the Company's direct marketing call center and distribution   
facility located in Mexico, Missouri and by Cyberian Outpost, Inc.              

Reclassifications                                                               

Certain reclassifications have been made to the Fiscal 2000 and Fiscal
1999 balances to conform with the current year.                                 

Recent Accounting Pronouncements                                                

     In June 1998, the Financial Accounting Standards Board issued statement No.
133 ("SFAS No. 133"), "Accounting for Derivative Instruments and Hedging        
Activities," which establishes accounting and reporting standards for derivative
instruments, including derivative instruments embedded in other contracts,      
collectively referred to as derivatives, and for hedging activities. The Company
will adopt SFAS No. 133 as required by SFAS No.137, "Deferral of the Effective  
Date of the FASB Statement No. 133," in fiscal year 2001. To date, the Company  
has not utilized derivative instruments or hedging activities and therefore, the
adoption of SFAS 133 is not expected to have a material impact on the Company's 
financial position or results of operations.                                    

Accounting Principle Change                                                     

   During the fourth quarter of Fiscal 2000, the Company changed its revenue
recognition policy for catalog sales and other drop shipment sales in accordance
with Securities and Exchange Commission's Staff Accounting Bulletin No. 101     
("SAB 101"), "Revenue Recognition in Financial Statements". Under the provisions
of SAB 101, revenue on catalog sales is recognized at time of receipt instead of
at time of shipment, as the company retains risk of loss while the goods are in 
transit. The cumulative effect of this change for periods prior to Fiscal 2000  
is $308,000, net of tax benefit of $193,000, and is reflected in the Company's  
first fiscal quarter of 2000. The pro forma effect of SAB 101 on the net income 
of prior periods presented is not material.                                     

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3. CONSOLIDATED BALANCE SHEET DETAILS                                           

                                                        [Enlarge/Download Table]

                                           February 3, 2001        January 29, 2000  
                                        ---------------------------------------------
                                                                                     
Other Current Assets:                                                                
Prepaid rent                            $       3,490,000        $    3,200,000      
Prepaid insurances, postage, deposits                                                
and other                                         540,000             1,372,000      
                                        -----------------        --------------      
                                        $       4,030,000        $    4,572,000      
                                        =================        ==============      
Property and Equipment:                                                              
Leasehold improvements                  $      38,288,000        $   37,292,000      
Equipment furniture and fixtures               56,083,000            52,516,000      
                                        -----------------        --------------      
Total property and equipment                   94,371,000            89,808,000      

Accumulated depreciation and                                                         
   amortization                               (52,415,000)          (46,734,000)     
                                        -----------------        --------------      
                                        $      41,956,000        $   43,074,000      
                                        =================        ==============      
Intangible Assets:                                                                   
Trade name                              $       5,407,000        $    5,407,000      
Customer list                                     908,000               908,000      
                                        -----------------        --------------      
Total intangible assets                         6,315,000             6,315,000      
Accumulated amortization                         (956,000)             (409,000)     
                                        -----------------        --------------      
                                        $       5,359,000        $    5,906,000      
                                        =================        ==============      
Other Current Liabilities:                                                           
Merchandise credits and                                                              
 gift certificates                      $       5,425,000        $    4,344,000      
Accrued employee compensation and                                                    
   benefits                                     5,680,000             6,792,000      
     Rent payable                                 819,000               924,000      
     Income taxes payable                       9,104,000             8,249,000      
     Accrued expenses                           7,938,000             5,221,000      
                                        -----------------        --------------      
                                        $      28,966,000        $   25,530,000      
                                        =================        ==============      
Other Long-term Liabilities:                                                         
Straight-line rent liability            $       6,249,000        $    5,796,000      
Employee benefit obligations and other                                               
 long term liabilities                          5,506,000             5,000,000      
                                        -----------------        --------------      
                                        $      11,755,000        $   10,796,000      
                                        =================        ==============      

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4. GARDENERS EDEN ACQUISITION                                                   

   Effective on May 3, 1999, the Company acquired certain assets relating to
the Gardeners Eden catalog from Williams-Sonoma, Inc. at a purchase price of    
approximately $9.6 million. The acquisition was accounted for as a purchase. The
assets acquired were comprised of inventory valued at approximately $2.4        
million, prepaid catalog costs of approximately $0.3 million and deferred       
catalog costs valued at approximately $0.3 million. The value of these assets   
was offset by a liability of approximately $0.7 million for open customer orders
under the Gardeners Eden continuity program. The Company allocated the remaining
purchase price, approximately $6.3 million, to the valuation of intangible      
assets consisting of trade name for $5.4 million and customer lists for $0.9    
million. The intangible assets are being amortized on a straight-line basis,    
from 3 years to 20 years.                                                       

5. INCOME TAXES                                                                 

   Temporary differences, which give rise to deferred tax assets and
liabilities for Fiscal 2000 and Fiscal 1999, are as follows:                    

                                                                [Download Table]


                               February 3, 2001    January 29, 2000 
                               ----------------    ---------------- 
Deferred tax assets:                                                
                                                                    
Rent expense                  $       2,366,000  $         2,173,000
Inventory capitalization and                                        
   reserves                             607,000              439,000
Employee benefit obligations          1,475,000            1,667,000
Vacation accrual                         94,000              269,000
Merchandise credits and                                             
     gift certificates                1,710,000            1,301,000
Tax depreciation                        215,000              463,000
Sales return reserve                    380,000                     
Other items                           1,102,000              635,000
                              -----------------  -------------------
Total deferred tax asset      $       7,949,000  $         6,947,000
                              =================  ===================
Deferred tax liabilities:                                           

Deferred catalog costs                  639,000  $           477,000
Other items                              15,000              103,000
                              -----------------  -------------------
Total deferred tax liability  $         654,000  $           580,000
                              -----------------  -------------------
Net deferred tax asset        $       7,295,000  $         6,367,000
                              =================  ===================

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     Current and non-current deferred tax assets and liabilities within the same
tax jurisdiction are offset for presentation in the consolidated balance sheet. 
A valuation allowance has not been established as management expects that it is 
more likely than not that the net deferred tax asset will be realized.          

The provision for income taxes is comprised of the following:         

  Year Ended
  ----------
 February 3, 2001   January 29, 2000    January 30, 1999
 ----------------   ----------------    ----------------
Current:                                                                        
Federal    $   9,380,000       $  7,962,000        $  4,894,000           
State            863,000            884,000             880,000           

Deferred:                                                                       
Federal         (606,000)          (476,000)            225,000           
State           (129,000)           (73,000)             72,000           
-------------       ------------        ------------
$   9,508,000       $  8,297,000        $  6,071,000

Reconciliation of the U. S. Federal statutory rate to the Company's   
effective tax rate is as follows:                                               

        Year Ended
        ----------
         February 3, 2001   January 29, 2000    January 30, 1999
         ----------------   ----------------    ----------------
Statutory federal                                                               
income tax rate         35%               35%                  34%              

State income taxes,                                                             
net of federal tax                                                              
benefit                  2%                2%                   3%              

Other                    1%                1%                   2%              
           --------          --------             --------
Effective income                                                                
tax rate                38%               38%                  39%              
           ========          ========             ========

   The exercise of stock options which have been granted under the Company's
stock option plans (refer to Note 8) gives rise to compensation which is        
includable in the taxable income of the optionees and deductible by the Company 
for federal and state income tax purposes. Such compensation considers increases
in the fair market value of the Company's common stock subsequent to the date of
the grant. For financial reporting purposes, the tax effect of this             

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deduction is accounted for as a credit to additional paid-in capital rather than
as a reduction of income tax expense. Such exercises resulted in a tax benefit  
to the Company of approximately $48,000, $782,000, and $832,000 in Fiscal 2000, 
Fiscal 1999 and Fiscal 1998, respectively.                                      

6. SEGMENT REPORTING                                                            

    Business conducted by the Company can be segmented into two distinct areas
determined by the method of distribution channel. The retail segment is         
comprised of all full-year stores in addition to all temporary stores and       
kiosks. Retail product distribution is conducted directly through the store     
location. The direct marketing segment is comprised of the Hard-to-Find Tools,  
Brookstone Gift Collection and Gardeners Eden catalogs and products promoted via
the Internet site www.Brookstone.com. Direct marketing product distribution is  
conducted through the Company's direct marketing call center and distribution   
facility located in Mexico, Missouri along with Cyberian Outpost, Inc. Both     
segments of the Company sell similar products, although not all Company products
are fully available within both segments.                                       

     All costs directly attributable to the direct marketing segment are charged
accordingly while all remaining operating costs are charged to the retail       
segment. The Company's management does not review assets by segment.            

The following table discloses segment net sales, pre-tax income and   
depreciation and amortization expense for Fiscal 2000, Fiscal 1999 and Fiscal   
1998 (in thousands):                                                            

                                                        [Enlarge/Download Table]

                                          Net Sales                                Pre-tax Income             
                     ------------------------------------------  -------------------------------------------- 
                             2000           1999           1998       2000              1999             1998 
                     ------------------------------------------  -------------------------------------------- 
Reportable segment:                                                                                           
                                                                                                              
   Retail              $  298,360  $     270,660  $     243,805  $  25,008   $        21,729  $        16,273 
   Direct marketing        66,181         56,195         32,246        378             1,003              808 

Reconciling items:                                                                                            
   Interest income            ---            ---            ---        982               535              206 
   Interest expense           ---            ---            ---     (1,608)           (1,660)          (1,878)
                     ------------------------------------------  -------------------------------------------- 
Consolidated:          $  364,541  $     326,855  $     276,051  $  24,760   $        21,607  $        15,409 
                     ==========================================  ============================================ 
                                                                [Download Table]

                              Depreciation & Amortization         

                     ---------------------------------------------
                           2000           1999           1998     
                     ---------------------------------------------
Reportable segment:                                               
                                                                  
  Retail             $    9,336  $       8,514  $       7,575     
  Direct marketing          851            630            217     
                     ---------------------------------------------
Consolidated:        $   10,187  $       9,144  $       7,792     
                     =============================================

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7.   DEBT                                                                       

Revolving Credit Agreement                                                      

   The Company has a revolving credit agreement that provides for borrowings
of up to $75 million for letters of credit and working capital as long as the   
Company meets a borrowing base test equal to 50% of the amount of eligible      
inventory and outstanding documentary letters of credit (increasing to 65% June 
through July and to 75% August through November). Amounts available for         
borrowings are reduced by the aggregate amount of outstanding letters of credit,
which may not exceed $40 million, and borrowings. The revolving credit agreement
requires the Company to have no more than $10 million in borrowings (excluding  
letters of credit) outstanding for one 30 consecutive day period during the     
December 15 to April 30 period. Borrowings outstanding under this facility bear 
interest, at the election by the Company, equal to the agent bank's base lending
rate or the Eurodollar rate for the applicable period plus an additional 1.0%,  
1.25% or 1.5% depending on the applicable cash flow coverage ratio (at February 
3, 2001 the rate was 6.56%). In addition, the Company is obligated to pay a fee 
of 0.25% or 0.30% on the unused portion of the commitment and 0.50%, 0.625% or  
0.75% on documentary letters of credit (depending on the applicable cash flow   
coverage ratio). The facility expires July 31, 2002. At the Lender's option, all
positive cash balances held by the Lender's banks may be applied to the         
outstanding balance of the revolving line of credit. The revolving credit       
agreement contains a number of restrictive covenants, including limitations on  
incurring additional indebtedness, granting liens, selling assets, engaging in  
mergers and other similar transactions, engaging in new business lines and      
making capital expenditures. In addition, the agreement prohibits the paying of 
cash dividends on common stock and requires that the Company maintain certain   
financial ratios, including tests pertaining to net worth, ratio of liabilities 
to net worth and cash flow coverage. During the year ended and as of February 3,
2001, the Company was in compliance with these covenants.                       

On May 11, 1999 the Company amended and restated the above-mentioned  
credit agreement to accommodate the Company's acquisition of the Gardeners Eden 
catalog from Williams-Sonoma, Inc. The amended agreement remains substantially  
the same as outlined above.                                                     

    During Fiscal 2000, the Company borrowed a maximum amount of $35.8 million
under the revolving credit facility. There were no outstanding borrowings under 
the revolving credit agreement respectively at February 3, 2001 and January 29, 
2000. There were $6.6 million and $6.0 million in outstanding documentary       
letters of credit at February 3, 2001 and January 29, 2000, respectively. In    
addition, $1.5 million in stand-by letters of credit were drawable by store     
lessors at February 3, 2001 and January 29, 2000.                               

Capital Lease Obligation                                                        

    The Company's lease for its Mexico, Missouri distribution facility extends
over twenty years at prime plus 1% per annum (10.50% at February 3, 2001 and    
9.25% at January 29, 2000). The interest rate is adjusted annually on           
November 1.                                                                     

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The principal balance of this obligation amounted to $2.5 million at  
February 3, 2001 and $2.6 million at January 29, 2000. Property capitalized     
under this capital lease amounted to $3.1 million, with accumulated amortization
of $730,000 and $631,000 at February 3, 2001 and January 29, 2000, respectively.

Scheduled payments of the capital lease obligation as of February 3,  
2001 are as follows:                                                            

Fiscal Year                                                                     
2001                          $  360,000                                        
2002                             360,000                                        
2003                             360,000                                        
2004                             360,000                                        
2005                             360,000                                        
Thereafter                     2,760,000                                        
----------          
$4,560,000          

Interest on capital lease                                                       
obligation included above     (2,047,000)                                       
----------          
Remaining principal           $2,513,000                                        
==========          

Current portion of the capital lease obligation equaled $99,000 and   
$100,000 at February 3, 2001 and January 29, 2000, respectively.                

8. SHAREHOLDERS' EQUITY                                                         

Preferred Stock                                                                 

     The Board of Directors is authorized, subject to any limitations prescribed
by law, to issue shares of preferred stock in one or more series. Each such     
series of preferred stock shall have rights, preferences, privileges and        
restrictions, including voting rights, dividend rights, conversion rights,      
redemption privileges and liquidation preferences, as shall be determined by the
Board of Directors.                                                             

Employee Stock Plans                                                            

The Company has stock option plans for key associates, officers and directors of
the Company, which provide for nonqualified and incentive stock options. The    
Board of Directors determines the term of each option, option price and number  
of shares at the date of grant. For all options granted after Fiscal 1991, such 
option prices equaled the fair market value at the date of grant. Options       
granted generally vest over four years from the date of grant and expire after  
ten years. Certain non-qualified options become exercisable five years from the 
date of grant, however, the exercise date of all or a portion of such options   
may be accelerated if the price of the Company's common stock reaches certain   
target amounts. At February 3, 2001 options of 557,009 shares were exercisable  
under the various associate stock option plans, and 42,000 shares were          
exercisable under the Directors' stock option plan. At February 3, 2001, options
of 764,845 shares were available for future grants under the various associate  
stock option plans, and 94,000 shares were available for future grants under the
Directors' stock option plan.                                                   

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Stock Purchase Plans                                                            

The Company's stock purchase plans which cover substantially all      
associates, allows for the issuance of a maximum of 60,000 and 75,000 shares of 
common stock under the 1992 Employee Stock Purchase Plan ("1992 ESPP") and 2000 
Employee Stock Purchase Plan ("2000 ESPP"), respectively. The options are       
exercisable at the lower of 85% of market value at the beginning or end of the  
six-month period, through accumulation of payroll deductions of up to 10% of    
each participating employee's regular base pay during such period. Purchases    
occur at the end of one or more option periods. Since adoption, there have been 
three, six-month option periods under the 1992 ESPP, which began on July 1,     
1993, January 1, 1994 and November 4, 1997. The six-month option period that    
began on November 4, 1997 expired on May 4, 1998, resulting in the issuance of  
17,102 shares to participating associates. The Board of Directors may, at its   
discretion, extend the 1992 Employee Stock Purchase Plan for additional periods.
As of February 3, 2001, there were 14,033 options available for future grants   
under this plan. On November 1, 2000 a six-month option period began under the  
2000 ESPP.                                                                      

   Transactions under the Company's stock option plans for each of the three
years in the period ended February 3, 2001 are as follows:                      

                  Number of Shares     Weighted Average Exercise Price
                  ----------------------------------------------------
Outstanding at                                                                  
January 31, 1998         1,261,622                 $    7.10              
Granted                  113,500                 $   12.89            
Exercised               (176,100)                $    0.53            
Canceled                 (67,625)                $    9.26            

Outstanding at                                                                  
January 30, 1999         1,131,397                 $    8.58              
Granted                   68,000                 $   15.21            
Exercised               (232,304)                $    3.91            
Canceled                 (85,584)                $   12.84            

Outstanding at                                                                  
January 29, 2000           881,509                                        
Granted                  368,000                 $    8.58            
Exercised                (23,750)                $   15.21            
Canceled                 (64,500)                $    3.91            

Outstanding at                                                                  
February 3, 2001         1,161,259                 $   11.42              

   Of the 1,161,259 shares outstanding at February 3, 2001, 1,097,259 shares
were outstanding under the various associate stock option plans, and 64,000     
shares were outstanding under the Directors' stock option plan.                 

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     SFAS No. 123, "Accounting for Stock-Based Compensation" permits the Company
to follow the measurement provisions of APB Opinion No. 25, "Accounting for     
Stock Issued to Employees", and not recognize compensation expense for its      
stock-based incentive plans. Had 43 compensation cost for the Company's stock-  
based incentive compensation plans been determined based on the fair value at   
the grant dates of awards under those plans, consistent with the methodology    
prescribed by SFAS No. 123, the Company's net income and related earnings per   
share for fiscal 2000, 1999 and 1998 would have been reduced to the pro forma   
amounts indicated below:                                                        

                                                                [Download Table]

                                                   Fiscal Year                     
                              -----------------------------------------------------
                                     2000            1999              1998        
                              -----------------------------------------------------
                                                                                   
Net income - as reported      $     14,944,000   $  13,310,000     $   9,338,000   
Net income - pro forma              14,672,000      12,958,000         8,973,000   

Earnings per share - basic                                                         
As reported                           $  1.80       $  1.63           $  1.17      
Pro forma                                1.77          1.59              1.12      

Earnings per share - diluted                                                       
As reported                           $  1.76       $  1.58           $  1.13      
Pro forma                                1.73          1.54              1.08      

     The fair value of each option grant is estimated on the date of grant using
the Black -Scholes option-pricing model with the following weighted-average     
assumptions.                                                                    

                                 Fiscal Year
                                    ------------------------------
                                    2000         1999         1998
                                    ----         ----         ----
Expected stock price volatility            46.9%        47.9%       47.8%       
Risk-free interest rate                     6.6%         5.8%        5.4%       
Expected life of options                  5 years      5 years     5 years      
Dividend yield                              ---          ---         ---        

    The weighted average fair value of options granted for Fiscal 2000, Fiscal
1999 and Fiscal 1998 are $10.34, $7.52 and $6.30, respectively.                 

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    The following table summarizes information about stock options outstanding
at February 3, 2001:                                                            

                                                        [Enlarge/Download Table]

                                          Options Outstanding                      Options Exercisable   
                                ------------------------------------------------------------------------ 
           Range of Exercise    Number          Weighted        Weighted       Number           Weighted 
                Prices          Outstanding     Average         Average        Exercisable      Average  
                                at 2/3/01       Remaining       Exercise       at 2/3/01        Exercise 
                                                Contractual     Price                              Price 
                                                Life                                                     
                                ------------------------------------------------------------------------ 
                                                                                                         
$0.002                          31,882         0.6 years         $ 0.002          31,882       $  0.002  
$0.63                            2,000         1.3 years         $ 0.63            2,000       $   0.63  
$5.375-$8.00                   106,502         3.6 years         $ 5.46          106,502       $   5.46  
$8.125-$12.5625                478,875         5.9 years         $ 9.45          282,000       $   9.52  
$13.4375-$15.3125              542,000         7.4 years         $15.05          176,625       $  14.56  
---------------------------------------------------------------------------------------------------------
                             1,161,259                                           599,009                 

     Because the determination of the fair value of all options granted includes
vesting periods over several years and additional option grants are expected to 
be made each year, the above pro forma disclosures are not representative of pro
forma effects of reported net income for future periods.                        

EARNINGS PER COMMON SHARE                                                       

   The following is an analysis of the differences between basic and diluted
earnings per common share in accordance with SFAS No. 128, "Earnings per Share".

                                                        [Enlarge/Download Table]

                                 February 3, 2001  January 29, 2000  January 30, 1999
                                 ----------------  ----------------  ----------------
                                                                                     
Net income                       $  14,944,000     $ 13,310,000       $ 9,338,000    
                                 ================  ================  ================
Weighted average common shares                                                       
outstanding                          8,310,000        8,155,000         7,988,000    

Effect of dilutive securities:                                                       
   Stock options                       162,000          267,000           297,000    
                                -----------------  ----------------   ---------------
Weighted average common shares                                                       
and common share equivalents         8,472,000        8,422,000         8,285,000    
                                =================  ================   ===============

                                                                              45

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9. PENSION AND 401(k) PLANS                                                     

     The Company sponsors the Brookstone Pension Plan, which provides retirement
benefits 45 for its employees who have completed one year of service and who    
were participating in the plan prior to May 31, 1998. As of May 30, 1998, the   
Board of Directors approved freezing future benefits under this plan. As a      
result, the Company recorded a gain on curtailment of $111,000 in Fiscal 1998.  
The Company anticipates that curtailment of the plan will not have a material   
effect on the Company's consolidated financial statements. The retirement plan  
is a final average pay plan. It is the Company's policy to fund the cost of     
benefits expected to accrue during the year plus amortization of any unfunded   
accrued liabilities related to periods of service prior to the valuation date.  

     The Company sponsors a 401(k) plan for all associates who have completed at
least one year of service with a minimum of 1,000 hours and have attained the   
age of 21. The Board of Directors, concurrently with freezing the pension plan, 
approved the increase of the Company's 401(k) matching contribution of each     
participating employee's salary from a maximum of 1.5% to a maximum of 4.0%. The
Company's matching 401(k) contribution was $710,000, $618,000 and $402,000 in   
Fiscal 2000, Fiscal 1999 and Fiscal 1998, respectively.                         

     The following tables set forth the pension plan's funded status and amounts
recognized in the Company's consolidated financial statements.                  

                        February 3, 2001      January 29, 2000
------------------------------------------------------------------------        
Change in Projected benefit                                                     
obligation:                                                               

Projected benefit obligation                                                    
at beginning of fiscal year      $ 3,840,000             $  4,092,000           
Service cost                         125,000                  120,000           
Interest cost                        286,000                  282,000           
Actuarial loss (gain)                 (3,000)                (344,000)          
Expenses paid                        (80,000)                (117,000)          
Benefits paid                       (221,000)                (193,000)          
Projected benefit obligation     -----------             ------------           
at end of fiscal year            $ 3,947,000             $  3,840,000           
                      ===========             ============

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The change in plan assets was:                                        

                        February 3, 2001      January 29, 2000
------------------------------------------------------------------------        

Fair value at beginning of                                                      
fiscal year                     $ 4,211,000             $  3,940,000          
Actual return on plan assets        (199,000)                 553,000           
Employer contributions               107,000                   28,000           
Expenses paid                        (80,000)                (117,000)          
Benefits paid                       (221,000)                (193,000)          
                      -----------             ------------
Fair value at end of fiscal year $ 3,818,000             $  4,211,000           
                      ===========             ============

The funded status was:                                                

                        February 3, 2001      January 29, 2000
------------------------------------------------------------------------        
Funded status at end of year     $  (129,000)            $   371,000            
Unrecognized net actuarial gain     (220,000)               (812,000)           
                     -----------             -----------
Accrued benefit cost             $  (349,000)            $  (441,000)           
                     ===========             ===========

Assumptions used in computing the funded status were as follows:      

Weighted average discount rate      7.50%                    7.50%              
Expected return on plan assets         9%                       9%              
Rate of increase in compensation                                                
levels                                 4%                       4%              

The components of net periodic pension cost were as follows:          

                        February 3, 2001      January 29, 2000
------------------------------------------------------------------------        
Service cost                     $   125,000             $   120,000            
Interest cost                        286,000                 282,000            
Expected return on plan assets      (366,000)               (340,000)           
Amortization of prior service                                                   
cost                                     ---                     ---            
Recognized net actuarial loss        (30,000)                    ---            
                     -----------             -----------
Net periodic benefit cost        $    15,000             $    62,000            
                     ===========             ===========

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10. POST-RETIREMENT BENEFITS OTHER THAN PENSIONS                                

  The Company sponsors a defined benefit post-retirement medical plan that
covers all of 47 its full time associates. All associates who retire from the   
Company's defined benefit pension plan who have either attained age 65 with five
years of service, or who have attained age 55 with 10 years of service and 70   
points are eligible. Associates, who retire prior to age 65, and their spouses, 
are each required to contribute 50% of the premium. Spouses of associates who   
retire after age 65 with 10 years of service are required to contribute 50% of  
their premium. Associates, who retire at age 65 with five to nine years of      
service, and their spouses, are required to contribute 50% and 75% of the       
premium, respectively. Associates not eligible for retirement as of February 1, 
1992 will be required to contribute the amount of premium in excess of $4,200   
pre-65 and $2,225 post-65; spouses are not eligible. The plan is not funded.    

    The following tables set forth the post-retirement plans funded status and
amounts recognized in the Company's consolidated financial statements.          

                                                        [Enlarge/Download Table]

                                                           February 3, 2001  January 29, 2000 
                                                           ----------------  ---------------- 
Accumulated post-retirement benefit obligation("APBO"):                                       
                                                                                              
APBO at end of prior fiscal year                         $       1,332,000     $    1,192,000 
Service Cost                                                       106,000             81,000 
Interest Cost                                                       99,000             86,000 
Actuarial loss / (gain) and assumption change                      (79,000)            41,000 
Benefits paid                                                      (86,000)           (68,000)
                                                         -----------------     -------------- 
APBO at end of current fiscal year                       $       1,372,000     $    1,332,000 
                                                         =================     ============== 

The change in plan assets was:                                                                
                                                          February 3, 2001   January 29, 2000 
                                                          ----------------   ---------------- 
Fair value at beginning of fiscal year                   $             ---     $          --- 
Actual return on plan assets                                           ---                --- 
Employer contributions                                              86,000             68,000 
Participant Contributions                                              ---                --- 
Expenses paid                                                          ---                --- 
Benefits paid                                                      (86,000)           (68,000)
                                                         -----------------     -------------- 
Fair value at end of fiscal year                         $               0       $          0 
                                                         =================     ============== 

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     The amounts recognized in the statement of financial position consisted of:

                                                                [Download Table]

                                        February 3, 2001        January 29, 2000
--------------------------------------------------------------------------------
                                                                                
Accrued benefit cost (other plans)         $ (2,890,000)          $  (2,901,000)
                                           ------------           ------------- 
Accrued benefit cost                       $ (2,890,000)          $  (2,901,000)

Funded status at end of fiscal year          (1,372,000)             (1,332,000)
Unrecognized prior service cost                (843,000)               (945,000)
Unrecognized net actuarial gain                (675,000)               (624,000)
                                           ------------           ------------- 
Accrued benefit cost                       $ (2,890,000)          $  (2,901,000)

The components of the net periodic post-retirement benefit cost were: 

                                                                [Download Table]

                                        February 3, 2001        January 29, 2000
--------------------------------------------------------------------------------
                                                                                
Service cost                               $    106,000           $      81,000 
Interest cost                                    99,000                  86,000 
Amortization of prior service cost             (102,000)               (102,000)
Recognized net actuarial gain                   (28,000)                (25,000)
                                           ------------           ------------- 
Net periodic benefit cost                  $     75,000           $      40,000 

The weighted average discount rate used in determining the accumulated
post-retirement benefit obligation was 7.50% as of February 3, 2001 and 7.50%   
as of January 29, 2000. For measurement purposes, a 7.4% annual rate of         
increase in the per capita cost of covered health care benefits was assumed     
for Fiscal 2000; this rate was assumed to decrease gradually down to 5% for     
Fiscal 2004 and remain at that level thereafter.                                

The medical cost trend rate assumption has a significant effect on the
amounts reported. However, the impact of medical inflation eventually diminishes
because of the limit of the Company's share of plan cost for accruals for       
associates who were not eligible to retire as of February 1, 1992. A one        
percentage point change in assumed health care cost trend rate would have had   
the following effects on February 3, 2001:                                      

                          Increase          Decrease
                          --------          --------
Effect on total of service                                                      
and interest cost components          $   1,745        $  (1,653)         

Effect on accumulated post-retirement                                           
benefit obligation                  $  25,008        $ (23,688)       

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11. COMMITMENTS AND CONTINGENCIES                                               

Lease Commitments                                                               

The Company leases all of its retail store locations and its corporate
headquarters. These leases are non-cancelable and have terms of up to 15 years. 
Certain leases provide for additional rents payable based on store sales.       

     At February 3, 2001, the minimum future rentals on non-cancelable operating
leases are as follows:                                                          

Fiscal Year                                                                     

2001                      $     26,018,000                                      
2002                            25,822,000                                      
2003                            24,770,000                                      
2004                            23,837,000                                      
2005                            22,106,000                                      
Thereafter                      85,124,000                                      
----------------            
$    207,677,000            
================            

Rent expense was approximately $27.0 million, $24.9 million and $22.7 
million for the years ended February 3, 2001, January 29, 2000 and January 30,  
1999, respectively, including contingent rent expenses of approximately         
$284,000, $200,000 and $310,000, respectively. This rent expense, along with    
other costs of occupancy are included in cost of sales in the consolidated      
statement of income.                                                            

Litigation                                                                      

    The Company is involved in various legal proceedings arising in the normal
course of business. Management believes that the resolution of these matters    
will not have a material effect on the consolidated financial statements.       

                                                                              50

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12.  QUARTERLY FINANCIAL DATA (unaudited).                                      

    The following fiscal 2000 quarterly information includes the impact of the
adoption of SAB 101 and EITF 00-10 (in thousands, except per share data):       

                                                        [Enlarge/Download Table]

                                                                         Fiscal 2000                                  
                                            --------------------------------------------------------------------------
                                              First Quarter     Second Quarter      Third Quarter     Fourth Quarter  
                                            ----------------  -----------------   ----------------- ------------------
                                                                                                                      
Net Sales                                       $51,077             $68,699           $63,817             $180,948    
Gross Profit                                     13,670              22,915            18,084               84,904    
Income (loss) from operations                    (7,638)               (606)           (7,537)              41,167    
Income (loss) before cumulative effect of                                                                             
accounting change                                (4,682)               (606)           (7,537)              41,167    
Cumulative effect of accounting change             (308)                ---               ---                  ---    
                                                -------             -------           -------             --------    
Net income (loss)                               $(4,990)            $  (399)          $(4,889)            $ 25,222    
                                                -------             -------           -------             --------    

Earnings (loss) per share: Basic                                                                                      
Earnings (loss) before cumulative effect of                                                                           
accounting change                               $ (0.56)            $ (0.05)          $ (0.59)            $   3.03    
Cumulative effect of accounting change            (0.04)                ---               ---                  ---    
                                                -------             -------           -------             --------    
Net income (loss)                               $ (0.60)            $ (0.05)          $ (0.59)            $   3.03    
                                                -------             -------           -------             --------    

Earnings (loss) per share: Diluted                                                                                    
Earnings (loss) before cumulative effect of                                                                           
accounting change                               $ (0.56)            $ (0.05)          $ (0.59)            $   2.98    
Cumulative effect of accounting change            (0.04)                ---               ---                  ---    
                                                -------             -------           -------             --------    
Net income (loss)                               $ (0.60)            $ (0.05)          $ (0.59)            $   2.98    
                                                -------             -------           -------             --------    

The effect of SAB 101 and EITF 00-10 on previously reported quarters was as     
follows (in thousands, except per share data):                                  

                                                                [Download Table]
                                         Effect of Change in Fiscal 2000        
                                ------------------------------------------------
Quarter Ended                   Net Sales         Net Income         Diluted EPS
-------------                   ---------         ----------         -----------
                                                                                
April 29, 2000                   $1,849             $(271)             $(0.03)  
July 29, 2000                     2,048                45                 ---   
October 28, 2000                    881               (97)              (0.01)  

Had the provisions of SAB 101 and EITF 00-10 been applied to Fiscal 1999, the   
pro forma effect on previously reported net sales, gross profit, net income     
(loss) and earnings per share would have been as follows (in thousands, except  
per share data):                                                                

                                                        [Enlarge/Download Table]

                                                                    Fiscal 1999                               
                                    --------------------------------------------------------------------------
                                      First Quarter     Second Quarter      Third Quarter     Fourth Quarter  
                                    ----------------  -----------------   ----------------- ------------------
                                                                                                              
Net Sales                                                                                                     
   As reported                          $42,100             $64,104           $53,234             $160,193    
   Pro forma                             43,068              65,413            54.034              163,715    
Gross Profit                                                                                                  
   As reported                           10,281              23,045            15,964               79,128    
   Pro forma                             10,228              22,964            15,262               78,491    
Income (loss) from operations                                                                                 
   As reported                           (7,371)                363            (6,759)              36,499    
   Pro forma                             (7,330)                368            (6,985)              36,521    
Net income (loss)                                                                                             
   As reported                          $(4,624)            $     9           $(4,489)            $ 22,414    
   Pro forma                             (4,599)                 12            (4,628)              22,428    

Earnings (loss) per share: Basic                                                                              
Net income (loss)                                                                                             
   As reported                          $ (0.57)            $   ---           $(0.55)             $   2.72    
   Pro forma                              (0.57)                ---            (0.57)                 2.73    

Earnings (loss) per share: Diluted                                                                            
Net income (loss)                                                                                             
   As reported                          $ (0.57)            $   ---       $    (0.55)             $   2.64    
   Pro forma                              (0.57)                ---            (0.57)                 2.64    

                                                                              51

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Consent of Independent Accountants  

We hereby consents to the incorporation by reference in the Registration        
Statement on Form S-8 (Nos. 33-88174, 33-48580, 33-32018, 33-17341 and          
33-63740) of Brookstone, Inc. of our report dated March 16, 2001 relating to the
financial statements and financial statement schedules, which appears in this   
Form 10-K.                                                                      

PricewaterhouseCoopers LLP                                                      
Boston, Massachusetts                                                           
May 3, 2001                                                                     

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2.   CONSOLIDATED FINANCIAL STATEMENT SCHEDULES.                                

Schedule II         Valuation and Qualifying Accounts and Reserves              

                                                        [Enlarge/Download Table]

                                            Year ended February 3, 2001                                      
-------------------------------------------------------------------------------------------------------------
                                 Beginning         Charged to costs                              Ending      
Description                       Balance            and expenses           Deductions          Balance      
                                                                                                             
Allowance for doubtful                                                                                       
accounts                      $     325,000         $   478,000            $  (197,000)        $    606,000  
                              -------------         -----------            -----------         ------------  
Inventory reserve             $   3,061,000         $   548,000            $  (617,000)        $  2,992,000  
                              -------------         -----------            -----------         ------------  
                                                        [Enlarge/Download Table]

                                             Year ended January 29, 2000                                     
-------------------------------------------------------------------------------------------------------------
                                 Beginning         Charged to costs                               Ending     
Description                       Balance            and expenses           Deductions           Balance     
                                                                                                             
Allowance for doubtful                                                                                       
accounts                     $      176,000        $    211,000            $   (62,000)        $    325,000  
                              -------------         -----------            -----------         ------------  
Inventory reserve            $    2,378,000        $    683,000            $         0         $  3,061,000  
                              -------------         -----------            -----------         ------------  
                                                        [Enlarge/Download Table]

                                             Year ended January 31, 1999                                     
-------------------------------------------------------------------------------------------------------------
                                 Beginning         Charged to costs                               Ending     
Description                       Balance            and expenses           Deductions           Balance     
                                                                                                             
Allowance for doubtful                                                                                       
accounts                     $     324,000         $     86,000            $  (234,000)        $    176,000  
                              -------------         -----------            -----------         ------------  
Inventory reserve            $   1,926,000         $    452,000            $         0         $  2,378,000  
                              -------------         -----------            -----------         ------------  

     All other schedules of which provision is made in the applicable regulation
of the Securities and Exchange Commission have been omitted because the         
information is disclosed in the Consolidated Financial Statements or because    
such schedules are not required or are not applicable.                          

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3.      EXHIBITS.                                                               

EXHIBIT NO.                         DESCRIPTION                                 

3.1         Restated Certificate of Incorporation, (filed with the Securities   
  and Exchange Commission as Exhibit 3.1 to the Registrant's
   Registration Statement on Form S-1 (File No. 33-47123), and
incorporated herein by reference).                      

3.2         Amended and restated by-laws (filed with the Securities and Exchange
            Commission as Exhibit 3.2 to the Registrant's Registration Statement
   on Form S-1 (File No. 33-47123), and incorporated herein by
reference).                                             

4.1         Specimen Certificate Representing the Common Stock (filed with the  
Securities and Exchange Commission as Exhibit 3.1 to the
            Registrant's Registration Statement on Form S-1 (File No. 33-47123),
and incorporated herein by reference).                  

10.1        Amended and Restated Stockholders Agreement dated as of August 22,  
            1991, among the Company and its stockholders party thereto and named
     therein (filed with the Securities and Exchange Commission as
           Exhibit 10.1 to the Registrant's Registration Statement on Form S-1
   (File No. 33-47123), and incorporated herein by reference).

10.2        1991 Stock Purchase and Option Plan, as amended (filed with the     
Securities and Exchange Commission as Exhibit 4.1 to the
            Registrant's Registration Statement on Form S-8 (File No. 33-63470),
and incorporated herein by reference).                  

10.3        Stock Option Agreement dated as of August 22, 1991, between the     
            Company and Merwin F. Kaminstein, including amendment dated February
       29, 1992, (filed with the Securities and Exchange Commission as
           Exhibit 10.4 to the Registrant's Registration Statement on Form S-1
   (File No. 33-47123), and incorporated herein by reference).

10.5        Stock Option Agreement dated as of August 22, 1991, between the     
        Company and Alexander M. Winiecki (filed with the Securities and
            Exchange Commission as Exhibit 10.7 to the Registrant's Registration
          Statement on Form S-1 (File No. 33-47123), and incorporated herein
by reference).                                          

10.6        Stock Option Agreement dated as of August 22, 1991, between the     
    Company and Jo-Ann B. Karalus (filed with the Securities and
            Exchange Commission as Exhibit 10.9 to the Registrant's Registration
          Statement on Form S-1 (File No. 33-47123), and incorporated herein
by reference).                                          

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EXHIBIT NO.                         DESCRIPTION                                 

10.7        Stock Option Agreement dated as of October 11, 1991, between the    
    Company and Mone Anathan, III (filed with the Securities and
Exchange Commission as Exhibit 10.10 to the Registrant's
   Registration Statement on Form S-1 (File No. 33-47123), and
incorporated herein by reference).                      

10.8        1992 Equity Incentive Plan, as amended and restated (filed with the 
           Securities and Exchange Commission as Exhibit A to the Registrant's
    1999 Proxy Statement, and incorporated herein by reference).

10.9        1992 Stock Purchase Plan, as amended (filed with the Securities and 
           Exchange Commission as Exhibit 4.3 to the Registrant's Registration
          Statement on Form S-8 (File No. 33-63740), and incorporated herein
by reference).                                          

10.10       1992 Management Incentive Bonus Plan (filed with the Securities and 
          Exchange Commission as Exhibit 10.12 to the Registrant's Form 10-K
for Fiscal 1993, and incorporated herein by reference). 

10.11       1992 Profit Sharing Plan (filed with the Securities and Exchange    
    Commission as Exhibit 10.14 to the Registrant's Registration
          Statement on Form S-1 (File No. 33-47123), and incorporated herein
by reference).                                          

10.12       Form of the Company's Pension Plan (filed with the Securities and   
Exchange Commission as Exhibit 10.15 to the Registrant's
   Registration Statement on Form S-1 (File No. 33-47123), and
incorporated herein by reference).                      

10.13       Amendment No. 1 dated as of February 25, 1994, to Kaminstein        
       Agreement (filed with the Securities and Exchange Commission as
          Exhibit 10.15.1 to the Registrant's Registration Statement on Form
       S-1 (File No. 33-75728), and incorporated herein by reference).

10.14       Employment Agreement dated April 2, 1991, between the Company and   
     Alexander M. Winiecki (filed with the Securities and Exchange
    Commission as Exhibit 10.18 to the Registrant's Registration
          Statement on Form S-1 (File No. 33-47123), and incorporated herein
by reference).                                          

10.15       Severance Agreement dated March 15, 1991, between the Company and   
 Jo-Ann B. Karalus (filed with the Securities and Exchange
    Commission as Exhibit 10.21 to the Registrant's Registration
          Statement on Form S-1 (File No. 33-47123), and incorporated herein
by reference).                                          

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EXHIBIT NO.                         DESCRIPTION                                 

10.16       Employment Agreement dated September 30, 1994, between the Company  
      and Michael F. Anthony (filed with the Securities and Exchange
         Commission as Exhibit 10.17 to the Registrant's Form 10-K for the
           year ended January 28, 1995, and incorporated herein by reference).

10.18       Lease Agreement dated as of March 26, 1993, between the City of     
       Mexico, Missouri, as lessor, and BCI, as lessee (filed with the
  Securities and Exchange Commission as Exhibit 10.23 to the
            Registrant's Registration Statement on Form S-1 (File No. 33-75728),
and incorporated herein by reference).                  

10.19       Option Agreement dated as of March 26, 1993, between the City of    
        Mexico, Missouri and BCI (filed with the Securities and Exchange
    Commission as Exhibit 10.24 to the Registrant's Registration
          Statement on Form S-1 (File No. 33-75728), and incorporated herein
by reference).                                          

10.20       Loan Agreement dated as of March 26, 1993, among BCI, the City of   
         Mexico, Missouri, The Industrial Development Authority of Mexico,
       Missouri and First National Bank (filed with the Securities and
Exchange Commission as Exhibit 10.24 to the Registrant's
   Registration Statement on Form S-1 (File No. 33-75728), and
incorporated herein by reference).                      

10.22       1996 Directors Stock Option Plan (filed with the Securities and     
       Exchange Commission as Exhibit A to the Registrant's 1996 Proxy
Statement, and incorporated herein by reference).       

10.23       Employment Agreement dated November 3, 1996, between the Company and
           Philip W. Roizin (filed with the Securities and Exchange Commission
            as Exhibit 10.25 to the Registrant's Form 10-Q for the quarter ended
November 2, 1996, and incorporated herein by reference).

10.24       Revolving Credit Agreement dated September 22, 1997, among the      
        Company, Brookstone Company, Inc. ("BCI") and Brookstone Stores,
         Inc. and BankBoston N.A. as agent for the lenders (files with the
 Securities and Exchange Commission s Exhibit 10.25 to the
         Registrant's Form 10-Q for the quarter ended November 1, 1997 and
incorporated herein by reference.)                      

10.25       Amended and Restated Revolving Credit Agreement dated May 11, 1999, 
          among the Company, Brookstone Company, Inc. ("BCI") and Brookstone
           Stores, Inc., Brookstone Acquisitions Sub, Inc. and BankBoston N.A.
        as agent for the lenders (filed with the Securities and Exchange
         Commission as Exhibit 10.25 to the Registrant's Form 10-K for the
          year ended January 29, 2000 and incorporated herein by reference).

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EXHIBIT NO.                         DESCRIPTION                                 

10.26       1999 Equity Incentive Plan (filed with the Securities and Exchange  
         Commission as Exhibit A to the Registrant's 1999 Proxy Statement,
and incorporated herein by reference).                  

10.27       Employment Agreement dated January 17, 2000, between the Company and
            Kenneth J. Mesnik (filed with the Securities and Exchange Commission
         as Exhibit 10.27 to the Registrant's Form 10-K for the year ended
January 29, 2000 and incorporated herein by reference). 

10.28       Employment Agreement dated January 4, 2001, between the Company and 
Gregory B. Sweeney (filed herewith).                    

10.29       2000 Employee Stock Purchase Plan (filed with the Securities and    
          Exchange Commission on Registrant's Form S-8 dated October 25,2000
and incorporated herein by reference.                   

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EXHIBIT NO.                         DESCRIPTION                                 

13          The 2000 Annual Report to Stockholders of the Company, except for   
        those portions thereof which are incorporated in this Form 10-K,
          shall be furnished for the information of the Commission and shall
not be deemed "filed".                                  

21          List of Subsidiaries (filed herewith)                               

23.1        Consent of PricewaterhouseCoopers LLP, which is reflected on page   
(filed herewith).                                       

14(b)   Reports on Form 8-K                                                     

The Company did not file any reports on Form 8-K during the quarter ended       
February 3, 2001.                                                               

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SIGNATURES  

Pursuant to the requirements of Section 13 or 15(d) 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, on May 4, 2001.           

      Brookstone, Inc.

              By: /s/ Philip W. Roizin
                  --------------------
              Philip W. Roizin
                     Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and  
in the capacities, each on May 4, 2001.                                         

Signature                     Title                                             

/s/ Michael F. Anthony        Chairman, President and Chief Executive Officer   
----------------------        Director                                          
Michael F. Anthony            (Principal Executive Officer)                     

/s/ Philip W. Roizin          Executive Vice President, Finance & Administration
----------------------        (Principal Financial and Accounting Officer)      
Philip W. Roizin                                                                

/s/ Mone Anathan, III         Director                                          
----------------------                                                          
Mone Anathan, III                                                               

/s/ Kenneth E. Nisch          Director                                          
----------------------                                                          
Kenneth E. Nisch                                                                

/s/ Michael L. Glazer         Director                                          
----------------------                                                          
Michael L. Glazer                                                               

/s/ Robert F. White           Director                                          
----------------------                                                          
Robert F. White                                                                 

                                                                              59

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘10-K405’ Filing		Date		First		Last			Other Filings
		7/31/02		20		41
Filed on:		5/4/01		59
		5/3/01		52
		4/20/01		1		14
		4/14/01		10
		3/16/01		25		52
For Period End:		2/3/01		1		58
		1/4/01		57
		11/1/00		43
		4/29/00		51					10-Q
		1/30/00		15
		1/29/00		17		57			10-K405
		1/17/00		57
		5/11/99		41		56
		5/3/99		38
		1/31/99		53
		1/30/99		18		50			10-K405
		5/31/98		46
		5/30/98		46
		5/4/98		43
		11/4/97		43
		11/1/97		56					10-Q
		9/22/97		56
		11/3/96		56
		11/2/96		56					10-Q
		1/28/95		56
		9/30/94		56
		2/25/94		55
		1/1/94		43
		7/1/93		43
		3/26/93		56
		2/29/92		54
		2/1/92		48		49
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