More bad news for retail. According to this Fortune report Toys ‘R’ Us will be closing 180 underperforming stores. Over the summer Toys ‘R’ Us filed for bankruptcy protection, but that didn’t stop the struggling retailer from paying out $14 million in bonuses to incompetent executives who ran the company into the ground.
As expected when it filed for bankruptcy protection last summer, struggling toy retailer Toys ‘R’ Us is closing an enormous number of stores, 180 stores to be specific or nearly 20% of its fleet, as it tries to get back to being a viable chain.
Toys ‘R’ Us on Monday night asked federal bankruptcy court in Richmond, Virginia for permission to close those stores, saying it has “faced a challenging commercial environment” made worse, it claimed, by consumer preferences to online stores from brick and mortar stores.
The company had been weighed down by enormous debt levels – $5 billion pre-bankruptcy, and years of weak sales as business did indeed defect to Amazon.com(AMZN, +1.68%), but also to major chains like Target (TGT, +0.87%) and Walmart (WMT, +1.67%), which have proven far more adept at withstanding competition from Amazon but also made their toy offerings far more enticing.
Via the Washington Post: Bankrupt Toys R Us can pay executives millions of dollars in bonuses, judge rules
With the holiday shopping season approaching and bankruptcy proceedingsunderway in federal court, Toys R Us went to its creditors in November with an unorthodox request. To boost sales, the insolvent company asked: Let us pay out millions of dollars in bonuses to our top executives.
On Tuesday, a bankruptcy judge approved the request.
Under the plan, Toys R Us will pay 17 executives about $14 million in incentive bonuses, as long as the company hits its target of $550 million in earnings. It must hit a minimum of $484 million in adjusted earnings before any bonuses are awarded, as USA Today reported.
Attorneys for the company argued in court papers that the bonuses would help encourage executives to focus on driving up sales as the holidays approach.
“Timing, of course, is everything,” they wrote in a Nov. 14 filing. “Now more than ever the senior management team must be properly motivated and incentivized to handle the panoply of responsibilities attendant to their two full-time jobs of leading the Debtors through this restructuring and, at the same time, implementing a worldwide strategy to increase sales following a near shut-down of operations just eight short weeks ago. The task at hand cannot be underestimated.”
But Judy Robbins, a Justice Department lawyer representing the interests of creditors, contended that the bonuses were excessive, given the company’s financial situation.
“It defies logic and wisdom, not to mention the Bankruptcy Code, that a bankrupt company would now propose further multi-million dollar bonuses for the senior leadership of a company that began the year with employee layoffs and concludes it in the midst of the holiday season in bankruptcy,” she wrote.