Body Shop Canada to lay off 200 workers after parent company took its cash,

The Body Shop Canada Ltd. is seeking creditor protection and closing a third of its stores because its parent company stripped the Canadian arm of cash and pushed it into debt, according to court documents.

An affidavit published through the company’s court monitor from Jordan Searle, who heads the Canadian arm, describes how troubles befell the retailer, whose parent company The Body Shop International Ltd. was bought by European private equity firm Aurelius for $355 million Cdn.

The Body Shop Canada announced Friday it will close 33 of its 105 stores and its e-commerce operations as it seeks to restructure itself under the Bankruptcy and Insolvency Act. The news came just weeks after its parent company filed for creditor protection in Britain.

The Canadian branch had 784 workers before the filings were made and about 200 will be laid off by the end of March, according to the court documents. Twenty head office employees and two contractors had their employment terminated Friday, the documents show.

Now, the longevity of the 48-year-old international company known for its cruelty-free skin care products hinges on its ability to restructure in several markets.

Situation ‘deteriorated sharply’ in December 2023

In Canada, where The Body Shop has been a mall stalwart since 1980, finding a path forward could involve untangling the company’s finances.

The affidavit from Searle, who has been The Body Shop Canada’s general manager since February 2023 and also runs its U.S. affiliate, said the retailer’s parent company had “full control” of The Body Shop Canada’s inventory, human resources, accounts payables, cash management and information technology.

WATCH | The Body Shop Canada closing 33 stores, ending e-commerce: 

The Body Shop to close 33 Canadian stores

The Body Shop is shutting down 33 stores in Canada and stopping online sales. Some experts attribute the chain’s downfall to increased competition in the ethical-beauty space.

Since at least 2007, The Body Shop International used a cash pooling arrangement, where The Body Shop Canada’s funds were regularly sent to the parent company which then took care of its Canadian arm’s rent and payroll obligations, Searle said.

“The cash pooling arrangement has allowed The Body Shop Canada to operate with little to no institutional debt, helping it to weather a particularly difficult period for the retail industry: the COVID-19 pandemic,” the affidavit said.

“Emerging from the pandemic, The Body Shop Canada’s performance has shown significant improvement and was on track to being cash-positive by the end of this year.”

The Body Shop Canada’s situation “deteriorated sharply” in December 2023, the affidavit said. The Body Shop International kept taking its money but wasn’t paying vendors because it said it had lost access to its financing and was slowing payments to creditors to conserve cash, Searle said.

The Body Shop International filed for administration in the U.K. on Feb. 13. Administration is a legal process that…

Read More: Body Shop Canada to lay off 200 workers after parent company took its cash,

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