Insolvency law expert on what’s next for The Body Shop
The UK-born beauty business The Body Shop has announced that it is closing almost half of its UK stores and cutting 270 jobs in its London-based headquarters.
The news came after the retailer went into administration last week.
The beauty and personal care retailer had 198 stores in the UK, yet according to administrators, the brand is "no longer viable" and had experienced "years of unprofitability".
Yesterday The Body Shop closed seven stores: in London’s Surrey Quays, Oxford Street/Bond Street, Canary Wharf and Cheapside, as well as one in Warwickshire, another in Kent, and another in Bristol.
In January, the German investment company Aurelius, which has acquired The Body Shop from Brazilian multinational Natura & Co in December 2023, announced that it would divest from around 10 European and Asian markets.
The acquiring entity, which they dubbed a ‘family office’, was Alma24, which supposedly had links to Aurelius via its director/majority shareholder, German entrepreneur Friedrich Trautwein.
German stores have also now entered into administration, while Belgian, Austrian, Irish and Luxembourg subsidiaries could be next. And concerning reports are also currently circulating in France – where it has a workforce of 260 people.
It appears that the retailers for French and Dutch operations will remain under the umbrella of the British parent company, which has just entered insolvency.
According to an interview with the UK national newspaper The Financial Times, operations in the UK, Australian and Canadian businesses had been viewed as the most potentially lucrative. However, poor sales over the festive period could have sent the business sliding into bankruptcy.
The administrators from accounting firm FRP Advisory said they would now: “consider all options to find a way forward for the business and will update creditors and employees in due course.”
Being prepared for a business sale?
According to Professor Rebecca Parry, an expert in insolvency law based at Nottingham University Law School, it looks like The Body Shop International Ltd chain could be being prepared for a business sale “which essentially enables the valuable parts of the business to be preserved and leaves the debts behind,” she explained.
She speculated that: “The business will be sold to the highest bidder, which could be a new company controlled by the existing owner and set up for the purpose of the business sale.”
“The debts will remain behind with the old company which will be liquidated and the money from the sale will be available for creditors,” she added.
According to Professor Parry, the current owner loaned money to the company that would have enabled the Body Shop to be kept going, but they required in return security over The Body Shop's assets, so this means that “the current owner has priority in the insolvency,”
She shared that they would then “be paid ahead of suppliers and other unsecured creditors.”
Parry also added that criticism has been made of this type of business sale but it is likely that the administrators could not identify a way to keep the business trading without this action being taken.
“It might therefore be kicking the can down the road if the underlying issues which have led to the Body Shop struggling are not addressed," she concluded.
Fair trade suppliers could be left with surplus stock
Meanwhile, there have also been reports in the UK national press that the business’ fair trade suppliers are worried they could be left with more than $1m (US) worth of beauty ingredients as the company faces an uncertain future.
The eco-conscious retailer worked with 18 community fair trade partnerships across the globe – many of who are in low income, remote locations – but some of these suppliers have now told The Guardian newspaper that they could be left with huge amounts of unpaid and unordered stock if the company goes under.
Some of these suppliers are said to have worked with The Body Shop for over 20 years but have no written contract. “It is going to affect the whole supply chain,” one supplier told The Guardian.
FRP stated that creditors would be kept informed as the process unfolds and that “any supplier debts will be lined up behind many other creditors.”
