World News

Judge approves Toys R Us bonus plan

Published on: December 7th, 2017

Toys R Us won court approval on Tuesday for plan to pay top executives up to $21 million in bonuses.

The retailer argued that the money will incentivise the executives to boost the bankrupt retailer’s sales during the critical year-end shopping season.

According to Toys R Us lawyer Joshua Sussberg, Toys R Us Chief Executive David Brandon, one of the bonus plan beneficiaries, estimates that only half of the US population has completed their holiday purchases – indicating that there is still time to motivate shoppers “to buy as much as they can.”

Toy R Us makes 40% of net sales in the fourth quarter and its performance during the holiday season could drive the outcome of its attempted turnaround during a seismic shift in the retail industry.

Judge Keith Phillips approved the bonus plan over an objection by the US Trustee, a government bankruptcy watchdog, after Toys R Us advisers called the payments reasonable.

Under the Toys R Us plan, 17 eligible executives would split about $21m if earnings before interest, depreciation and amortisation for this fiscal year reach $641m. Executives would split about $14m if earnings reach $550m. The terms were revised after a complaint from unsecured creditors, who ultimately backed the plan.

The US Trustee blasted the proposal, saying five of the potential recipients split $8.2m in retention bonuses a week before the 19th September bankruptcy filing, and noted other salary perks for David Brandon such as aircraft and limousine use.

On Monday, Toys R Us UK said it plans to close at least 26 of its 105 stores in Britain in 2018. It has not yet unveiled planned US store closures.

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