A week after it closed all of its U.S. Morphe retail stores, beauty incubator Forma Brands filed for Chapter 11 bankruptcy on Thursday along with its direct and indirect subsidiaries.
The beauty brand company has entered a proposed acquisition deal with lenders including Jefferies Finance in which creditors will provide $33 million to take over its wholesale operations, online platforms and international Morphe retail stores, according to a company press release.
Court documents show that the brand began experiencing "liquidity and operational issues a result of the COVID-19 pandemic, widespread changes to consumers’ beauty habits and their need to terminate partnerships with certain influencers.” Forma has around $868 million of funded principal debt and interest obligations.
“Over the last year, FORMA Brands has been implementing initiatives to stabilize our business and reposition our organization for long-term growth. This agreement is a testament to the strength of our brands most meaningful to our consumers, including Morphe and Morphe 2,” Simon Cowell, president of Forma Brands, said in a statement. “We will have additional financial resources available to invest in our multi-category portfolio, product launches and innovative brand and marketing strategy as we advance our vision to inspire creativity, promote inclusivity and connect with consumers around the world through beauty. We appreciate the continued support of our financial partners and believe this is the best path forward for FORMA Brands as we position the business for the long term.”
Forma Brands was previously named Morphe Holdings, but re-launched under its current name as a brand accelerator in 2020. Private equity firm General Atlantic announced it would acquire a controlling stake in the company in 2019.
Along with operating the makeup brand Morphe, Forma’s other brands include Bad Habit (which boasted influencer Emma Chamberlain as creative director), Jaclyn Cosmetics (with YouTuber Jaclyn Hill as the face) and Playa Beauty. The company has bet big on attaching beauty influencers to its branding, including Morphe collaborations with Jeffree Star and James Charles.
Chamberlain’s contract with the company has since expired, and the creative director role with Bad Habit ending, according to The New York Times. Additionally, Playa Beauty founder Shelby Wild filed a lawsuit against General Atlantic and Morphe in December, alleging the companies did not support the brand following their acquisition of it, according to Business of Fashion reporting.
The beauty industry has seen a bag of mixed results over the past year. Skincare brands The Ordinary and Dr. Dennis Gross both announced price hikes in December, citing rising ingredient costs and supply chain logistics as causes. But mass retailers like Ulta have thrived, with the company’s latest earnings showing Ulta’s sales, comps and profits were up double digits.