The early new year often brings retail administrations, and so it has sadly proved for The Body Shop’s UK business.
A good Christmas can prompt creditors to call in debts because they stand to regain more than they would otherwise. But a bad Christmas can prove the final straw as hoped for cash fails to flow through the tills.
Unlike some retailers, The Body Shop’s UK business managed to make it through January before calling in administrator FRP this week. However, The Body Shop’s collapse in its home market was a bit of a bolt from the blue, coming so soon after the acquisition of the beauty business by private equity group Aurelius.
Unlike the fragrant lotions and potions that line the retailer’s shelves, The Body Shop’s plunge into adminstration leaves a bad smell. It’s thought that The Body Shop’s peak trading was not as good as hoped – but should that have come as much of a surprise?
“Aurelius, when it bought The Body Shop, boasted of its experience in ‘many complex corporate carve-outs across Europe’”
The retailer’s sale to Aurelius only closed in December. The uncertainty that almost always accompanies takeovers of underperforming companies would likely have led to nervousness among staff about what the future might hold, which may have had a consequent impact on performance.
There have also been suggestions that The Body Shop had insufficient working capital. You would expect, however, that a new owner would have taken into account working capital requirements in the immediate aftermath of a takeover, and planned for potential turbulence – especially an owner like Aurelius which, when it bought The Body Shop, boasted of its experience in “many complex corporate carve-outs across Europe, including the acquisitions of renowned brands such as Footasylum from JD Sports.”
The Body Shop’s difficulties were ultimately blamed on “an extended period of financial challenges under past owners”. Fair enough. That was also said to have coincided with difficult trading conditions for retailers in general. Yet, The Body Shop’s market had proved one of the more resilient.
According to GlobalData, health and beauty has been not just surviving, but “thriving”. It calculates that the UK market was up 7.1% in 2023, “holding up well throughout the cost-of-living crisis as consumers continued to indulge themselves with inexpensive treats.”
That was certainly reflected in strong performances from retailers such as Boots and Superdrug, at the expense of The Body Shop. While the comparative underperformance of The Body Shop was surely why the famous brand represented an opportunity, surely nobody would have assumed that potential could ever be realised overnight?
“So where next for The Body Shop? Aurelius-backed Lloydspharmacy went into liquidation a few weeks ago. Hardly an auspicious sign”
So where next for The Body Shop? Another Aurelius-backed specialist health retailer, Lloydspharmacy, went into liquidation a few weeks ago with debts of £293m. Hardly an auspicious sign.
However, FRP said at its appointment as administrator to The Body Shop: “Taking this approach provides the stability, flexibility and security to find the best means of securing the future of The Body Shop and revitalising this iconic British brand…
“The Body Shop remains guided by its ambition to be a modern, dynamic beauty brand, relevant to customers and able to compete for the long term. Creating a more nimble and financially stable UK business is an important step in achieving this.”
Let’s hope that’s the case. The reality is, though, that the fundamental questions raised about how to revitalise the business – such as what its place is and whether it can make the most of an illustrious heritage and positioning that has increasingly been replicated by others – remain unanswered.
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