The Body Shop UK to appoint administrators risking job loss and retail closures

13 Feb 2024 --- The Body Shop’s new owner, Aurelius, is set to bring in administrators for the retailer’s UK business. The full effects of the appointment are not clear, however, reports say it is likely to cause shop closures and job cuts, enabling the business to reduce costs. 

The news comes after Natura &Co agreed to sell The Body Shop to the international private equity group for £207 million (US$262 million) in November. The value falls short of the £880 million (US$1 billion) that Natura &Co paid L’Oréal to buy the retailer in September 2017.

Currently, there are around 200 The Body Shop stores in the UK. The administration process is not expected to impact The Body Shop’s global franchise partners, reports suggest. 

Financial crisis
The retailer’s net revenue was BRL 830 million (US$168 million), down -13.2% in constant currency (Image credit: The Body Shop).The UK government states that a company enters administration to fulfill one of the administration’s statutory goals. This process might be undertaken to save a workable company that is bankrupt from cash flow issues.

In its Q3 2023 performance, Natura &Co’s CEO Fábio Barbosa described a “continuing declining trend in sales at The Body Shop.” The retailer’s net revenue was BRL 830 million (US$168 million), down -13.2% in constant currency.

In Q3-23, the combined sales of the three main business distribution channels — stores, e-commerce and franchises — showed a high-single-digit decline in constant currency, which Natura &Co says was slightly worse than in Q2-23. The closure of stores (111 over the last 12 months), which accounted for 4.5% of all Q3-22 stores, was a major contributor to this decline.

Strategic restructuring
Meanwhile, The Body Shop is selling most of its businesses across Europe and in parts of Asia to an international family office. 

The retailer recently told Retail Week it will prioritize its “strategically important markets and global head franchise partner relationships, which it will look for opportunities to build…The ambition is to create a modern and dynamic beauty brand relevant to customers and able to compete for the long term.”

“The Body Shop will also focus on more effectively reaching customers by strengthening digital platforms, developing new sales channels and via differentiated retail experiences.”

A UK insolvency procedure could make it possible for a company that has struggled under several corporate owners to become leaner and more financially stable, experts note.The Body Shop faces competition from faster evolving brands like Lush.

Additionally, Retail Week reported that Natura &Co’s group legal counsel recently contacted Aurelius to inquire why the long-term incentive grants that were supposed to be given to departing employees as part of their severance have not yet been received.

Evolving landscape
The Body Shop, founded by Anita Roddick and her husband Gordon in 1976, was a prominent shop known for its ethical stance against animal testing. The retailer recently became the “world’s first” global beauty brand to achieve 100% vegan product formulations across all ranges.

However, The Body Shop’s growth slowed as a result of Roddick losing ownership of the company to L’Oréal and others, according to the BBC.

The well-known brand is no longer widely recognized for its sensory experience and competes with faster-evolving brands like Lush, which is known for tapping into cultural trends, colorful displays and olfactory experiments that resonate with the younger generation.

By Venya Patel