Body Shop Canada files for bankruptcy protection, plans restructuring

The Body Shop Canada Ltd. says it will close 33 stores and halt its e-commerce operations as it seeks to restructure under the Bankruptcy and Insolvency Act.

The Canadian subsidiary of the international cosmetics brand announced Friday that it will immediately begin liquidating almost a third of its 105 stores. 

The company did not say how many workers would lose their jobs as a result of the store closures that span locations in cities including Toronto, Ottawa, Edmonton, Calgary, Saskatoon and Saint John, N.B.

A court filing showed the company owes more than $3.3 million to unsecured creditors and about $16,400 to secured creditors.

The company’s U.S. arm has also ceased operations, Body Shop Canada said Friday.

The moves come weeks after the company’s parent, The Body Shop International Ltd., filed for administration — a process that allows companies to restructure or wind down without paying off its debts — in the U.K. 

British media reported Thursday that 75 of the brand’s U.K. stores would close and 40 per cent of its headquarters staff would be laid off.

In Canada, the company wants to keep the bulk of its stores and said in a press release it hopes Ontario court proceedings will give it “breathing room” while it evaluates its strategic alternatives and engages in restructuring. 

As part of that restructuring, the company will cease accepting and selling new and existing gift cards, will no longer provide refunds and will consider all new and previous purchases final, said Body Shop North America president Jordan Searle in a memo sent to Canadian staff on Friday and obtained by The Canadian Press.

Efforts to improve the business, which uses an environment-friendly ethos to sell an assortment of bath, body, hair and skincare products, have cropped up as The Body Shop marks 44 years in Canada.

RIVALS ERODED UNIQUENESS OF THE BODY SHOP

The Canadian division of the retailer has been a steady presence predominantly in malls since its expansion into the country in 1980, but in more recent years has faced several challenges, including the dawn of e-commerce and the growth of beauty brands Sephora, Bath & Body Works and Lush brought intense competition to the sector. 

As rivals sprouted up, Lisa Hutcheson, a retail strategist with J.C. Williams Group, saw The Body Shop’s uniqueness eroded. 

“It really lost its value proposition, and it didn’t change. It just sort of stayed the same,” she said.

“Aside from a few iterations on store design, there wasn’t really ever any innovation, so I think the consumer just started to look to the other brands that were coming along.”

The Body Shop Canada responded in 2022 by opening some stores under a new “workshop” concept that taught customers about sustainability practices, explained who makes their products and what consumers can do to get involved in environmental and community activism.

It also began selling an assortment of products, including its popular body butters, in 25 Shoppers Drug Mart stores last summer with another 25 locations expected to stock the products this year. 

The move marked the first time Body Shop products were sold in Canada outside the company’s stores and was meant to make shopping for its merchandise even more convenient.

The Workshop stores and Shoppers partnership preceded the sale of parent company The Body Shop International to European private-equity firm Aurelius Group for £207 million ($355 million) late last year.

A memo sent to Body Shop employees in the U.S. and obtained by The Canadian Press said the parent company used a centralized cash management system.

Under this arrangement, money from international divisions such as the U.S. was cleared from accounts on a daily basis by The Body Shop International, which would then send cash to its various subsidiaries on an as-needed basis, the memo from HR director Jennifer Wale said.

After recently sweeping all the funds from the U.S. arm’s account, Wale said the parent company stopped paying vendors, creating a “catastrophic situation” where the company was cut off from its funding “with no advance notice.”

“Aurelius remained silent in the face of all urgent requests from the Company, even though aware of catastrophic consequences for North America,” Wale wrote.

The letter also notes that the U.S. division was given no advance notice of the U.K. administration proceedings.

When The Canadian Press asked Aurelius and The Body Shop International in February how The Body Shop’s Canadian operations could be affected by the U.K. administration proceedings, Methuselah Tanyanyiwa of Dentons Global Advisors said both refused to comment. The administration proceedings “only affect the U.K. market and not Canada,” Tanyanyiwa emailed. He did not respond to requests for comment Friday.

FRP Advisory, an accounting firm appointed to handle The Body Shop’s U.K. proceedings, did not respond to repeated requests for comment about the Canadian operations.

Aurelius is known for buying faltering companies it restructures and sometimes resells. Over the last 20 years, it bought British home-shopping channel Ideal World, the Scholl foot-care business and U.K. drugstore chain Lloyds Pharmacy.

In a November press release, Aurelius partner Tristan Nagler positioned The Body Shop purchase as a way to make “operational improvements and re-energize the business and help to deliver the next chapter of success.”

The Body Shop was founded by late environmental activist Anita Roddick in 1976 to bring consumers beauty and skincare products not tested on animals and developed through fair relationships with farmers and suppliers.

Roddick began with a shop in Brighton, a seaside town south of London. As the company grew its store count, it changed hands several times. It was acquired in 2006 for £207 million ($1.1 billion) by beauty giant L’Oreal, which eventually sold the company to Natura, the Brazil-based owner of Avon, in 2017 for €1 billion ($1.4 billion). Natura sold the firm to Aurelius.

When the Aurelius sale was announced, the firm said The Body Shop had more than 900 company-owned stores in 20 countries and partnerships with head franchisees who operate 1,600 stores in 69 regions.

The Body Shop stores closing in Canada:

Atlantic Canada: Champlain Place (Dieppe), Corner Brook Plaza (Corner Brook), Mayflower Mall (Sydney), McAllister Place (Saint John), Truro Mall (Truro)

Ontario: Bayview Village (Toronto), Carlingwood Mall (Ottawa), Cataraqui Town Centre (Kingston), Dufferin Mall (Toronto), Fairview Park Mall (Kitchener), Lambton Mall (Sarnia), Lansdowne Place (Peterborough), Lynden Park Mall (Brantford), Place d’Orleans (Orleans), Queen Street East (Toronto), Rideau Centre (Ottawa), Stone Road Mall (Guelph), The Shops at Don Mills (Toronto), Timmins Square (Timmins), Toronto Pearson Term. 1 (Toronto)

Prairies: Cornwall Centre (Regina), Lawson Heights (Saskatoon), Lloyd Mall (Lloydminster), Londonderry Mall (Edmonton), Medicine Hat Mall (Medicine Hat), Midtown Plaza (Saskatoon), Park Place (Lethbridge), Shoppers Mall (Brandon), Sunridge Mall (Calgary), The Centre (Saskatoon)

BC: Hillside Shopping Centre (Victoria), Semiahmoo (White Rock), Village Green (Vernon)