Toys 'R' Us executives could get $14m bonuses as shop floor staff face losing their jobs

Last week, Toys ’R’ Us announced plans to close 26 of its 84 UK stores, putting 800 jobs at risk.

Ben Chapman
Thursday 07 December 2017 16:37 GMT
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The US company said the bonuses are required in order to incentivise senior staff to push for higher sales
The US company said the bonuses are required in order to incentivise senior staff to push for higher sales

Top executives at Toys ’R’ Us can receive up to $14m (£10.5m) in bonuses despite the retailer collapsing into bankruptcy earlier this year, a judge has ruled. Last week, Toys ’R’ Us announced plans to close 26 of its 84 UK stores, putting 800 jobs at risk.

The US company said the bonuses are required in order to incentivise senior staff to push for higher sales during the festive period. The company agreed to cut its proposed $16m bonus pool by $2m and to add a condition to $5m of the payout stating the company must create a business plan that will steer it out of bankruptcy.

The US Trustee’s office had objected to the bonus award, arguing that Toys ’R’ Us bosses already receive higher pay than people in comparable jobs at other retailers. The bankruptcy watchdog claimed they also receive lavish perks, including drivers and trips in private jets but New Jersey judge Keith Phillips rejected those arguments.

None of Toys ’R’ Us’ creditors objected to the plan and those that had spoken in court wanted it to be approved he said. The plan represents sound business judgement and is “fair and reasonable under the circumstances,” the judge said.

The news comes after Judy Robbins, the Department of Justice trustee assigned to the case, argued last month that the bonus plan “defies logic and sense”.

Toys ’R’ Us filed for Chapter 11 bankruptcy in September after being crushed by a mountain of debt resulting from a $6.6bn buyout by KKR and Bain Capital in 2005. At the time of the filing, the UK unit was not thought to be affected.

In a statement on Monday, the company said that it plans to revamp its business in response to “evolving needs of customers”.

Steve Knights, managing director of Toys ’R’ Us in the UK, said that the decision was a “difficult one” but that it was deemed “the best path forward to make essential changes to the business”.

Mr Knights said that many of Toys ‘R’ Us’ small stores were performing well, and the company’s online performance was robust too. But the bigger, warehouse-style outlets, opened in the 1980s and 1990s, are now “ too big and expensive to run in the current retail environment”.

“The business has been loss-making in recent years and so we need to take strong and decisive action to accelerate the transformation,” he said.

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