The Body Shop, a globally renowned brand of skincare products, cosmetics, and perfumes, has filed for bankruptcy in the US and Canada. As per reports, it is struggling to pay suppliers in Australia. Since the UK parent company’s collapse last month, the group’s most-profitable businesses are struggling with cash shortages, as per reports. In the US, The Body Shop has already ceased trading at its 50 outlets. Last Saturday, the company filed for Chapter 7 insolvency, which will permit it to sell off its assets to clear debts. In the process, about 400 jobs come directly under risk, including those in a distribution centre where stocks worth millions of dollars are still held. In neighbouring Canada, 33 out of 105 have already closed, resulting in a job loss of more than 200.
Hundreds of jobs cut in countries where the group has operations
In Australia and New Zealand, where The Body Shop has almost 100 stores and more than 20 respectively, it is understood that the future of the group is hanging by a thread as it struggles to clear huge 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. As per sources, the 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 that is known as “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 need to wait for a considerable time before any payment reaches them via FRP.
Furthermore, as per reports, the Australian business has unsustainable levels of debt that will require new funding. Since the UK business collapsed, FRP has announced the closure of than 80 of the 198 UK stores. More than 300 jobs have been cut from its head office.
Aurelius is the top creditor of the UK business. Other potentially interested parties are thought to be Next, as well as the HMV owner Doug Putman.
The Body Shop’s divisions in Germany, Denmark, Ireland and Belgium have declared 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.
India operations unlikely to be impacted
As per recent reports, the India operations of The Body Shop are unlikely to be impacted by the global changes in the group as it is a “head franchise market” to quote a senior member of the organization. All stores in India are open and customers can shop either online or at the pan-India outlets.
The Body Shop group was founded by the late environmental and human rights campaigner Anita Roddick in 1976.
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