The Body Shop plans to cease operations in the United States and close 33 of its 105 stores in Canada
Amid its bankruptcy process in the United Kingdom, the British beauty brand, The Body Shop, has made the decision to shut down its operations in the United States and close 33 of its 105 stores in Canada. This move comes after the sale of the company’s operations in France and Germany by Aurelius, which took place at the end of January.
Aurelius is a European private equity firm that primarily focuses on acquiring stakes in companies with growth potential or facing operational and financial challenges. To achieve its goals, Aurelius adopts an active management approach, working closely with acquired companies to implement operational and strategic changes. This may involve restructuring operations, optimizing processes, allocating resources, and even selling non-essential assets.
In addition to closing physical stores, the brand has also halted its online sales in the United States. In a press release, the company stated that, following the restructuring process in the UK, The Body Shop in Canada will also undergo a restructuring to seek a stay of execution and gain additional breathing space while evaluating its strategies and implementing initiatives to restructure its operations.
Market analysis suggests that high inflation in recent years, both in Canada and other countries, has harmed retailers like The Body Shop, which have a predominant presence in shopping malls and primarily cater to the middle class.
The challenges faced by The Body Shop include:
- Ownership Changes: Since its foundation in 1976, The Body Shop has undergone several ownership changes, being acquired by the French group L’Oréal in 2006 and later by Natura in 2017. These changes may have caused integration and strategic alignment challenges.
- Brand Exploitation Challenges: Following the acquisition by Natura, it was recognized that the Brazilian company faced difficulties in fully exploiting the potential of The Body Shop brand on a global scale. This may include issues related to adapting marketing strategy, distribution, and brand management across different markets.
- Competition in the Cosmetics Sector: The cosmetics market is highly competitive, with multiple brands vying for consumer attention. The Body Shop faces challenges in standing out and maintaining its relevance amidst this fierce competition.
- Evolution of the Retail Sector: The retail sector has undergone significant changes in recent years, with the growth of e-commerce and emerging new business models. The Body Shop may struggle to adapt to these changes and ensure a relevant presence both in physical stores and online.
- Sustainability Challenges: Although known for its ethical approach and commitment to sustainability, The Body Shop may face additional challenges in maintaining and effectively communicating these values in an increasingly environmentally conscious market.
These combined factors may contribute to the challenges faced by The Body Shop and require careful strategies to overcome them and ensure the brand’s long-term success.
Following the acquisition by the European private equity company Aurelius, it became evident that The Body Shop’s operation was facing significant challenges, with below-expected business performance, especially during the holiday season, while still under Natura’s control.
An analysis revealed that the store chain, which had 2,500 units in over 70 countries when Aurelius closed the deal, was spread across unprofitable markets. Among the markets considered attractive were the UK, Canada, and Australia. However, even in these markets, the company faced significant losses, as demonstrated by the $444 million loss in 2022 compared to a $62 million profit in the previous year.
Under Aurelius’s management, The Body Shop sought loans that put some of its most valuable assets at risk, including intellectual property and real estate. This means that in case of bankruptcy, Aurelius could claim these assets.
In a move to restructure its operations, the company agreed to sell part of its business, including operations in France and Germany, at the end of January. This change was seen as an important step in implementing a more robust recovery strategy for The Body Shop.
Additionally, the company filed for bankruptcy in Germany, where it employed 350 staff in 2021, as part of its efforts to address its financial difficulties.
The Company:
The Body Shop is a global brand of cosmetics, body care, and beauty products, founded in 1976 by Anita Roddick and her husband, Gordon Roddick. The company gained prominence for its innovative approach in combining business with ethical values and social activism. Since its inception, The Body Shop has been committed to producing natural products, free from animal testing, and supporting social and environmental causes.
One of the key features of The Body Shop is its emphasis on natural and organic ingredients. The brand pioneered the use of ingredients sourced from sustainable sources, such as plant oils, fruits, herbs, and plant extracts, in its products. Additionally, The Body Shop is known for its strict policy against animal testing, being one of the first cosmetics companies to adopt this stance.
Another distinctive aspect of The Body Shop is its commitment to social and environmental activism. The company engages in various corporate social responsibility initiatives, including campaigns against the use of animal-derived ingredients, advocacy for human rights, and environmental protection. The brand also supports community projects and non-profit organizations worldwide.
Over the years, The Body Shop has expanded its global presence and developed a wide range of products for skincare, body care, hair care, and makeup. Its stores are known for offering a unique sensory experience, with natural products and a welcoming atmosphere.
Although the brand has undergone ownership changes over time, its commitment to ethical and sustainable values has remained constant. The Body Shop has been an influential leader in the cosmetics industry, inspiring other companies to follow its example and promote positive changes in the world.
