After days of speculation, it was confirmed yesterday that The Body Shop has appointed administrators for its UK arm.
Less than two months after private equity firm Aurelius took control of the ethical beauty retailer in a £207m deal, FRP Advisory has been appointed to oversee the administration process. The business will continue to trade as normal but a restructuring to reduce costs and liabilities is expected to result in the closure of a significant number of its 200 UK stores.
A statement from FRP said: “Taking this approach provides the stability, flexibility and security to find the best means of securing the future of The Body Shop and revitalising this iconic British brand.”
After taking control of the business, Aurelius is said to have concluded that the company had insufficient working capital and trading was weaker than it had anticipated.
A turnaround plan implemented by the private equity firm has already resulted in the closure of The Body Shop At Home service and the disposal of its stores across most of Europe and in parts of Asia to an unnamed family office.
David Boynton, who ran The Body Shop until last April, told the BBC earlier this week that the timing of the administration “has surprised an awful lot of people in the financial community”.
He added: “It’s quite unusual that new owners would go into administration only five weeks after the acquisition. When there is an acquisition of this scale there is a massive amount of due diligence that takes place with many expensive advisory firms involved.”
The Body Shop’s most recently filed UK accounts show it slipped from a pre-tax profit of £10m to a loss of £71m in 2022 on sales down from £487m to £407m. The company blamed the loss on a “challenging and competitive retail environment” amid rising inflation, costs and interest rates.
The administrators added yesterday: “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.”
The insolvency process relates to the UK business only and does not affect The Body Shop’s global franchise partners.
Commenting on the retailer’s demise, Frank Bouette, a partner at city law firm DMH Stallard and a specialist in restructuring and insolvency, said: “Founded in 1976 in Brighton and based on ethical principles, it was a giant of UK brands, sold by Anita Roddick for £652m in 2006 to L’Oréal, to Natura for £880m in 2017 and to Aurelius for £200m in 2023.
“Many loyal customers saw the L’Oréal sale as a betrayal of its values and one that eroded its loyal customer base. Many say the sale meant it lost its guiding vision and ethics – lost its soul. It once stood for what a visionary ‘good’ business should be and people bought into that. It was sold to a brand that appeared to some to be the antithesis of that. Add to that industry comments that L’Oréal was equipped to operate a brand, but not a retailer, and you can see how previously its identity crisis began.
“With analysts describing a ‘lack of innovation’, the brand of the youth became the brand of mum, and as competitors started to emerge and catch up in its space, it was bound to face increasing challenges. The Body Shop’s fortunes improved during the pandemic, when people pampered themselves, but dropped again as the cost-of-living crisis started to bite, with customers looking for more affordable alternatives and some cast ethics aside.
“It’s understood that Aurelius made the decision to call in administrators following poor Christmas 2023 sales. It’s no secret that the high street is fragile, as larger anchor stores are exiting high streets for increased online presence and out-of-town locations. Decreasing footfall, exacerbated by train strikes and tighter family budgets, and customer spend suffers. The Body Shop has 206 stores, many on high streets and most will have felt that impact acutely. Throw in increased supply chain costs too and it’s the perfect storm.
“Perhaps The Body Shop had run its course and achieved its purpose. Without the visionary drive of its founder and with a sale to a house of brands, it was inevitably going to fade into the mainstream.
“The Body Shop name is unlikely to disappear, but it will have to be slimmed down and reshaped to compete in an increasingly crowded ethical beauty marketplace.”
NAM Implications:
- If only inevitabilities were all as easy to predict as The Body Shop (Release 2)…
- Cutting to fit is the only viable approach for businesses facing shrinking demand.
- Niche going mainstream changes everything.
- Now The Body Shop (Release 2) has to replace physical reach with virtual reach.
- Online-only beckons…
