‘Domino effect’ may affect The Body Shop NZ
There are questions over the future of The Body Shop in New Zealand and Australia, with reports of the Australian business facing significant cashflow issues following the collapse of its British parent company.
The UK parent of the skin care and cosmetics retail chain, which prides itself on its products not being tested on animals, went into administration in February and has closed dozens of stores.
Administrators have plans to close 82 of the 50-year-old chain’s almost 200 UK stores, and others have been promptly shut in other markets.
This week The Body Shop filed for bankruptcy in the United States, after shutting down all operations in the US effective from March 1, and it has rapidly been closing dozens of stores in Canada.
The Body Shop has more than 60 stores in Australia and 22 in New Zealand.
The New Zealand business is managed by the Australian company, and while the Australian business is said to be the most profitable international arm of the stricken business, the subsidiary, like others around the world, has become a creditor, and its access to funds has been cut off, Inside Retail reports.
Multiple reports suggest that money earned by the key overseas businesses during the peak trading period in November and December was paid into a global account, based in the UK, and as a result global subsidiaries, including the Australian business, were struggling to pay suppliers for services during that peak.
The Guardian reported “the future of the chain is hanging in the balance as it struggles to cover large debts”, and that some stores in New Zealand were affected.
Sources it spoke to said the Australian
business could cover its day-to-day expenses from cashflow but would need additional funds to cover debts to suppliers such as logistics firms, warehouses and marketing agencies.
Last month, The Body Shop said international franchises were not affected. However, it is not immediately clear if this is still the case.
Retail commentator Chris Wilkinson said the issues in the UK were having a “progressive domino effect around the world” because the finances were managed from the UK.
Even if operations were separate, challenges with suppliers and consumer confidence in the brand would have an impact on performance and continuity, Wilkinson said.
The Body Shop was once popular with teens but in recent years, with the rise of Tik Tok and other social media platforms, younger generations have sought out branded, more expensive skin care and beauty products.
Wilkinson said The Body Shop relied heavily on key gifting periods, and trading reached a peak around Christmas, when a significant proportion of the annual turnover was generated.
But it was noticeable last year that the brand had a lacklustre Christmas campaign when compared to comparative chains like Lush, whose stores were busy and vibrant.
“Sadly, The Body Shop has continued to age with its original customers and not been able to attract and engage successive generations, which is most necessary for brands to evolve successfully,” Wilkinson said.
“The Body Shop has been a staple of our malls and city centres now for many years, and it would be sad to see it go. However, hopefully a slimmed-down and evolved version of the stores and products could be possible if new investors are found to revitalise the brand.”
The Body Shop New Zealand has been contacted for comment.
On The Body Shop’s New Zealand website, a message reads that the retailer is now taking phone orders during its operational hours.
It was not immediately clear when that began or whether it came as part of wider plans to increase sales and local profitability.
Wilkinson said this showed who its main customer demographic was.
High inflation in recent years has hurt traditional retailers, particularly those like The Body Shop, that predominantly operated out of malls and targeted the struggling middle class.
The Body Shop was founded in 1976 by Anita and Gordon Roddick, environmental campaigners who wanted to promote ethical products in the beauty industry. It started with a single store in Brighton, England, and a range of just 25 products.
Before the increased focus on sustainability and animal welfare, its opposition to animal testing was a unique selling point.
By 1984, when The Body Shop listed on the London Stock Exchange, the retailer had 138 stores, 87 of them outside Britain.
The Body Shop was sold to private equity brand Aurelius for £207 million (NZ$431 million) in November, which claimed it wanted to “re-energise” the brand. Just three months later, administrators were called in.