People line up outside a Toys R Us store just before midnight to purchase toys in advance of the film "Star Wars: The Force Awakens" in Times Square in the Manhattan borough of New York. -Reuters
Toys 'R' Us won court approval on Tuesday for plan to pay top executives up to $21 million in bonuses by arguing that the money will incentivize them to boost the bankrupt retailer's sales during the critical year-end shopping season.
"The company is laser-focused on the holidays," Toys 'R' Us lawyer Joshua Sussberg said at a hearing at the US Bankruptcy Court in Richmond, Virginia. Sussberg said 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. That indicates there is still time to motivate shoppers "to buy as much as they can."
Toy 'R' Us, the largest US toy retailer, makes 40 percent 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. Many bankrupt companies pay bonuses as a way to motivate executives to reach earnings targets.
Under the Toys 'R' Us plan, 17 eligible executives would split about $21 million if earnings before interest, depreciation and amortization for this fiscal year reach $641 million. Sussberg called the target "incredibly hard to achieve."
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