The Body Shop files for bankruptcy in the US and Canada


The Body Shop has filed for bankruptcy in the US and Canada and is struggling to pay suppliers in Australia as the group’s most profitable overseas businesses struggle with cash shortages after its UK parent’s collapse last month.

The US arm of the ethical cosmetics group has ceased trading at its 50 outlets. On Saturday, it filed for Chapter 7 insolvency, under which assets are sold off to clear debts, putting about 400 jobs at risk including those in a distribution centre that still holds millions of dollars-worth of stock.

In Canada, 33 of the 105 shops have closed, with the loss of more than 200 jobs.

In Australia, where the group operates almost 100 stores and is responsible for more than 20 more in New Zealand, it is understood that the future of the chain is hanging in the balance as it struggles to cover large debts after its access to funds was cut off.

Sources said the profitable business could cover its day-to-day expenses from cashflow but would need additional funds to cover debts to suppliers such as logistics firms, warehouses and marketing agencies for services during its busy Christmas season.

The Body Shop’s UK arm collapsed in February, only months after a German private equity group, Aurelius, bought the group founded by the late environmental and human rights campaigner Anita Roddick. The deal was completed in January and the UK business was put into administration less than six weeks later.

Sources said that money earned by the key overseas businesses during the peak trading period in November and December was paid into a global account, based in the UK, in a practice termed “cash pooling”. However, funds in the account are now not available to cover debts to suppliers used during that period as access was cut off when the UK parent company called in the accounting firm FRP Advisory as administrators.

It is understood that the North American and Australasian businesses are now counted as creditors to the UK arm and may have to wait months for any payment via FRP.

A spokesperson for FRP said: “The cash pooling ceased upon The Body Shop International entering into administration with funds then remaining with each subsidiary entity.”

It is understood that the Australian business has unsustainable levels of debt which will require new funding.

Since the UK business collapsed, FRP has announced the closure of more than 80 of the ethical beauty retailer’s 198 UK stores while more than 300 jobs have been cut from its head office.

Aurelius is the top creditor of the UK business and, as it controls the brand rights, is in pole position to reclaim The Body Shop from administrators. Other potentially interested parties are thought to include Next, as well as the HMV owner Doug Putman.

The Body Shop’s divisions in Germany, Denmark, Ireland and Belgium have all been put into insolvency, with stores outside Germany closed, after being sold by Aurelius to Alma24. The company is controlled by Friedrich Trautwein, a close associate of Aurelius who has previously helped to shut down unwanted businesses.

skip past newsletter promotion

The future of The Body Shop’s operations in Spain, Sweden, France and Austria is unclear amid wrangling over ownership.

Filings in Canada reveal that the Body Shop there owed $3.3m (£1.9m) to landlords, logistics, providers, marketing agencies, insurers, utilities and freight service providers when it entered insolvency on 1 March. The company said it no longer had access to its e-commerce platform or the ability to ship to wholesale partners including Amazon or to receive new stocks because of difficulties in paying suppliers.

The problems come as it emerges that Aurelius has so far paid less than £100m of the headline £207m price for The Body Shop.

Only part of the agreed £117m initial purchase price has been so far handed over to the group’s former owner Natura, with the rest due over the coming five years. A further £90m is due only if certain performance criteria are met over that period, and so may never be paid.

Administrators are understood to be investigating a claim that more than £10m was extracted from The Body Shop’s UK arm in December by Natura. The money is understood to linked to debts owed by its former subsidiary which sources said had been laid out in the sale agreement between Natura and Aurelius.


Source link