The Body Shop Canada is currently exploring the possibility of a sale as it struggles to keep up with robust sales after announcing plans to file for creditor protection and close 33 stores. The head of the Canadian operations, Jordan Searle, mentioned in an affidavit that there has been significant interest from potential buyers, prompting the company to consider a sale. The exact parties interested in acquiring the skin care and cosmetics business have not been disclosed. This development comes after the parent company, The Body Shop International, filed for administration in the U.K. and the U.S. affiliate also announced closures.
The parent company’s involvement in The Body Shop Canada’s finances has been a point of contention, with Searle alleging that funds were stripped and the Canadian arm was pushed into debt. The businesses in Canada, the U.S., and the U.K. are interconnected through cash pooling arrangements where funds were sent to the parent company for various obligations. Following the administration filing in the U.K., The Body Shop Canada has not received any inventory from the U.S. distribution center, leading to inventory shortages despite higher than projected sales. Searle mentioned that $85 million worth of merchandise is currently sitting in the U.S. center.
The lack of inventory has put pressure on the 72 remaining stores in Canada, with the risk of running out of core merchandise in the near future. To address this issue, the company is looking to purchase inventory from the U.K. warehouse and the U.S. distribution center, as well as goods that were en route to Canada prior to the creditor protection filing. However, acquiring inventory from the U.S. center poses challenges as individuals who would have handled the task were previously employed by The Body Shop U.S. An application has been made to extend the deadline for filing a creditor protection proposal under the Bankruptcy and Insolvency Act, which was granted by a judge.
The extension until May 31 will allow The Body Shop Canada to focus on replenishing its inventory and continue discussions with the parent company and potential buyers to facilitate a going concern sale of the business. The company currently employs 570 individuals, and Searle stated that there are no further plans for headcount reductions. The overall goal is to ensure continuity for the business and address the challenges faced due to the inventory shortages and financial difficulties resulting from the parent company’s actions.
The situation faced by The Body Shop Canada highlights the complex interrelations within the global company structure and the impact of financial decisions on individual regions. The efforts to secure inventory, engage with stakeholders, and explore a potential sale demonstrate the resilience and determination of the Canadian operations amidst adversity. Moving forward, the company will continue its efforts to stabilize operations, serve customers, and pursue a viable path forward through active discussions and strategic decisions. The outcome of these actions will play a crucial role in shaping the future of The Body Shop Canada and its ability to thrive in the competitive retail industry.
