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FRP Advisory selected for The Body Shop administration

Shortly after a private equity company, The Body Shop has collapsed into administration in the UK. FRP Advisory will oversee the process, with thousands of jobs reportedly at risk at the cosmetics chain.

Founded in 1976 by Anita Roddick, The Body Shop International Limited, trading as The Body Shop, is a British cosmetics, skin care and perfume company. The company is seen by UK consumers as one of the most sustainable brands in the country, and currently has a range of 1,000 products sold in about 3,000 stores, either owned by the company, or in franchised outlets in more than 65 countries.

Over the years, the brand has changed owners on multiple occasions. In 2006, the Roddick family agreed to a £652.3 million takeover by L’Oréal, before 2017 saw Brazilian cosmetics company Natura take The Body Shop on for a deal of £880 million. However, the firm’s fortunes took a dive in the following years. In 2023, it was reported to be working to take on new business practices to improve its prospects – with leaders even attending an Agile workshop from Enfuse Group to speak about the apparently transformative power of the methodology – but was then sold to German private equity firm Aurelius for just £207 million later that year. 

Just three months later, Aurelius announced it had been unable to revive the fortunes of the business, after dismal trading over Christmas and new year. Aurelius then closed down the direct sales business, The Body Shop at Home, and sold off its stores in Europe and parts of Asia – which are understood to have been loss-making.

However, this seems only to have been a small sign of things to come. In early February, the owner announced it had appointed professionals from FRP Advisory as administrators, raising concerns over the future of the business. With almost 200 shops in the UK alone, as well as a distribution centre and head office, over 2,200 jobs are understood to be on the line.

In a statement, joint administrators Tony Wright, Geoff Rowley, and Alastair Massey commented, “Today, the directors of The Body Shop International Limited have appointed of FRP as administrator of the company, which operates The Body Shop’s UK business… The company faced an extended period of financial challenges under past owners, coinciding with a difficult trading environment for the wider retail sector” and they would “consider all options to find a way forward for the business and will update creditors and employees in due course”.

According to sources familiar with the situation, the brand is expected to survive in some form, but with far fewer shops. Aurelius itself is thought to be a likely buyer for a honed down business – with perhaps only 100 stores – but it is clear that administrators have already been in touch with other potentially interested parties. Industry bidders such as Next are thought to be among those interested.

This comes as the latest in a list of private equity firms presiding over the high-profile failures of UK high-street stalwarts – from Toys’R’Us, to Debenhams, Maplins and Phones4U, among others. Often such firms are accused of using acquired firms as a means to leverage debt – over encumbering previously healthy businesses with unaffordable loans, or picking up ailing companies to strip them of assets rather than revive them. Aurelius denies such allegations of its own operations, but has been accused of asset stripping previously by organisations including hedge-fund Gotham City Research.

Wider trends

Following the downfall of The Body Shop, Tom Mercer, commercial director at business consultancy GAIN LINE, said that other retailers should take the story as a warning of what could befall them. He added that for retailers to survive and thrive in today’s tough economic climate, his firm recommend retailers ensure they are on top of four key areas.

Mercer explained, “For traditional brick and mortar brands, lower footfall on the majority of high streets, combined with higher business rates and high value leasing agreements stacked in mass have left larger retailing groups vulnerable. This is particularly the case for those who failed to adapt quickly enough, or at all, to changing consumer buying behaviour. It is imperative that all retailers understand changing consumer behaviour and react accordingly.”

Meanwhile, online retailers face global supply chain issues twinned with higher delivery expenses have caused significant disruption for cash flow and customer experience. Even in the long-hyped ecommerce scene, this has seen some operators fall into administration. To combat this, Mercer noted “online retailers should only invest heavily in stocking top selling brand lines, holding back some money to help prevent cashflow issues.”

Third, he added, “Reduced consumer spending is a major stumbling block for retailers, with inflation and cost of living pressures reducing impulse purchases for lower ticket items and increasing buying decision timelines for higher ticket items. This means retailers must consider creative sales strategies like incorporating flexible and smart payment options. For instance, for online sales, retailers can utilise smart payment methods at checkouts for better conversion rates and flexible payment options to reduce drop off.”

Finally, retailers with money tied in large quantities of stock are at high risk, especially with increasing marketing costs online due to ever increasing competition, as well as higher lease costs in prominent high street positions. Mercer concluded that it would be worth “lowering stock levels and, if possible, investing free cashflow into strengthening internal stock management and distribution processes instead.”