The Body Shop’s U.S. operation was given no notice of the U.K. company's February administration filing — akin to bankruptcy — and as a result has been forced into Chapter 7 bankruptcy itself, according to documents filed Friday with the U.S. Bankruptcy Court for the Southern District of New York.
The Body Shop International Limited filed for administration under U.K. insolvency laws “with no advance notice to, or pre-filing discussion with” its wholly-owned U.S. subsidiary, per the filings.
Moreover, the companies’ business arrangement included a centralized money management system where the U.S. operation’s cash “was swept on a daily basis” to a concentrated account, then advanced back to fund U.S. expenses. But the U.K.-based parent, having taken in all the U.S. cash prior to filing for administration, has held onto it since, "thereby preventing the [U.S.] Company from paying its vendors and satisfying other obligations,” per the filing.
That in turn has forced a Chapter 7 filing, the company said. The U.S. operation has assets of between $50 million and $100 million, and liabilities of between $10 million and $50 million, according to court documents.
Previously, in a press release detailing its intention to file for bankruptcy in Canada, The Body Shop Canada Limited stated that, effective March 1, “The Body Shop US Limited has ceased operations.”
Unlike the situation in the U.S., however, The Body Shop Canada is open for business as it “evaluates its strategic alternatives and implements certain restructuring initiatives,” though its website is down and 33 of its 105 stores are slated to close.
The various bankruptcies, including the collapse of The Body Shop’s U.S. arm, come just a few months after private equity group Aurelius bought the brand for more than $250 million from Brazilian beauty conglomerate Natura & Co. In April last year, Natura & Co. had described The Body Shop as “a truly omnichannel business with more than 2,500 retail locations (owned and franchised) in more than 80 countries; The Body Shop at Home direct to consumer channel in the UK and Australia; and an e-commerce presence in nearly 60 markets.”
From its founding in the 1970s, The Body Shop centered its brand on natural ingredients and environmental concerns. But such attributes have become table stakes in the beauty sector, according to GlobalData analyst Tash Van Boxel, who previously noted that several brands including The Ordinary have co-opted that message along with marketing around scientific formulas and attractive price points.
