The Body Shop Shuts Down US Stores, Faces Uncertain Future Globally Amid Bankruptcy

The Body Shop is shutting all stores in the United States after filing for bankruptcy. The ethical cosmetics, skincare and perfume company also announced plans to close dozens of locations in Canada as a result of the bankruptcy case proceeding, according to an official release. In the US, the firm will cease trading at its 50 outlets and announced that its subsidiary in the country will no longer be operational, effective March 1.

Further, about 33 of its 105 stores in Canada will also begin liquidation sales immediately, and “online sales via Canada’s e-commerce store will stop.” However, remaining Canadian locations will remain open for the time being, the release said.

Ongoing Struggles of The Body Shop

High inflation and the cost of living crisis have hit several traditional retailers across the globe. However, chains like The Body Shop which predominantly operated out of malls and catered to the middle class, suffered more. Earlier this year, the nearly 50-year-old company announced it was near bankrupt in the UK after poor Christmas sales, the BBC reported.

This was months after the private equity firm, Aurelius bought the company for £207 million (approx. $265.2 million) in November. The Body Shop’s UK arm collapsed in February and was put into administration, just six weeks after the deal closed with Aurelius. Since the UK business collapsed, FRP Advisory announced the closure of over 80 of the 198 UK stores while more than 300 jobs were cut from its head office, The Guardian reported.

Following the collapse in the UK, The Body Shop filed for Chapter 7 insolvency in the US and Canada on March 9. While putting 400 jobs at risk, the company further stated that it is struggling to pay suppliers in Australia as well. In Canada, the firm has shut down 33 of its 105 shops, with the loss of over 200 jobs.

The future of the chain in Australia, and New Zealand, where the group operates almost 100 and 20 stores respectively, is hanging in balance. The chain is struggling to cover large debts after its funds were cut off from the parent in the UK.

Furthermore, The Body Shop’s divisions in Germany, Denmark, Ireland, and Belgium have also been put into insolvency. Stores outside Germany had already closed down after Aurelius sold the company to Alma24. The future of the company’s operations in Spain, Sweden, France, and Austria are also unclear.

History of The Body Shop

Founded in 1976 by British human rights activist and environmental campaigner Anita Roddick, The Body Shop marketed its products as natural, sustainable, ethical, and cruelty-free. The company was one of the first to prohibit testing on animals for many of its products. In 2019, it received the “B Corp,” certification for meeting certain transparency and environmental conscientiousness standards.

In its long years running, The Body Shop has changed hands several times. It was first purchased by cosmetics giant L’Oréal in 2006 for over a billion dollars. It was later sold to Brazilian company Natura&Co in 2017 for another billion dollars and it finally went to Aurelius in 2023.

However, by 2023, the chain expanded to over 2,500 retail locations in more than 80 countries and was available to purchase online in over 60 markets.

But it turns out that the firm's finances were not as strong as they looked. The brand has been ailing in recent years and an early 2023 report, Natura noted that The Body Shop was “(facing) headwinds” with a year-over-year decline of 13.5% in 2022.

As its direct-to-consumer channels, which “benefitted during Covid,” returned to “more normalized pre-pandemic levels,” the sales numbers plummeted, Natura said, according to CNN.

After being sold to Aurelius, the problems with the firm were apparent. As per The Guardian, Aurelius has paid less than £100 million (approximately $1.28 million) of the headline £207 million price for The Body Shop.

The rest of the amount is due over the five years, and about £90 million was due only if certain performance criteria are met over the five-year period, which may never be paid, the report mentioned.