The Body Shop, which runs more than 200 shops across the UK, has gone into administration just weeks after new owners took over operations of the cosmetics chain.
The owners have appointed accounting firm FRP Advisory to oversee the restructuring process.
The decision comes amid years of financial struggles and increasing competition in the UK market. According to the Financial Times, consumers had fallen out of love with The Body Shop with the company posting six consecutive quarters of losses prior to going into administration.
The insolvency experts from FRP Advisory will have to find a way to slash costs significantly, putting at risk thousands of people with jobs in the cosmetics chain.
“The Body Shop has faced an extended period of financial challenges under past owners, coinciding with a difficult trading environment for the wider retail sector,” FRP said in a statement.
The Body Shop currently has 200 stores across the UK but almost half of those will now have to be closed to cut costs. This may lead to a loss of over 2000 jobs.
“Administrators will now consider all options to find a way forward for the business and will update creditors and employees in due course,” FRP added in its statement.
The Body shop went downhill since takeover
The decision to go into administration comes as a shock to many industry experts as European private equity firm Aurelius had just secured a £207m deal to buy The Body Shop from Brazilian cosmetics giant Natura & Co.
The deal was agreed way below the £500 million asking price and at about 20% of what Natura had paid Loreal in 2017.
The new owners had only taken over operations at the start of the new year, so a swift collapse wasn’t expected. In the weeks since the takeover, the retailer has also closed its “The Body Shop At Home” service, which had been struggling financially for quite some time.
According to Aurelius, the decision was necessary to save the future of the brand since the company had much lower working capital than initially thought. Sales over Christmas and in early January were also lower than expected which proved to be the final straw.
Aurelius has also sold many of the Body Shop’s European and Asian businesses to an unnamed investor. However, the insolvency proceedings will not affect the brand’s global operations which span 70 countries.
It should also be noted that while The Body Shop will cut down operations massively, it is unlikely that the brand will go completely out of business. This will only be a restructuring process where the administrators will try to capture younger consumers while also expanding their operations online.
The business will most likely be cut down to 100 stores with Aurelius being the front-runner to buy the curtailed operations. However, the administrators have made it clear that they have been in touch with other potential bidders.
The Body Shop was founded in 1976 and immediately gained popularity not just for its products but for how they were sourced. It became one of the first companies to promote ethical consumerism, where cosmetics and skincare products are produced without being tested on animals.
Over the next 3 decades, it became arguably the biggest cosmetics retailer in the UK. In 2006, the family business was bought by French beauty giant L’Oreal in a £650 million deal. Sales started to drop in the years that followed due to increasing competition in the sustainability, and natural beauty space.
While the business will survive for now, the decision to move into administration comes as a major blow to the chain’s workforce and loyal customer base.
