The Green Cosmetics Retailer In The Red: Subsidiaries of The Body Shop File For Bankruptcy And Cease Operations

On March 1, 2024, The Body Shop Canada Limited and The Body Shop US Limited, subsidiaries of The Body Shop International Limited (The Body Shop), a global cosmetics and beauty retailer, filed for bankruptcy. Furthermore, The Body Shop's U.S. arm ceased operations immediately. Their demise came right after The Body Shop's UK, German, Belgian, and Danish operations filed for bankruptcy. In this commentary, we discuss the business risk weaknesses that contributed to the Company’s downfall, and how these weaknesses can be indicators for which retailers are at risk of experiencing a similar fate.

Key highlights include:
-- The Body Shop's demise highlights how small companies that have a relatively discretionary product offering but no product differentiation, have to contend with both upstream and downstream competition, and have limited category diversification, are more exposed to the risk of financial distress.
-- The challenging macroeconomic environment exacerbated the pressures on the Company's credit risk profile.

“In line with our negative outlook for both the global discretionary consumer products sector and the global retail sector, we believe that consumer spending will remain constrained in the near term, negatively affecting demand for more discretionary products, and thus volumes and operating margins of discretionary consumer product companies and retailers,” said Aarti Magan, Vice President – Corporate Ratings. “The Body Shop is one of the first casualties this year, but could well be the first of many.”