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 £207 million ($355 million).
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.
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.
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 allows companies to restructure or wind down without paying off all its debts.
Asked about The Body Shop Canada’s claims, a spokesperson for the joint administrators being used in The Body Shop International’s U.K. proceedings said in an email the company had long used cash pooling but that process ceased at the time of the administration “with funds then remaining with each subsidiary entity.”
On Monday, the Ontario Superior Court of Justice granted measures including a requirement for the company’s suppliers to continue to provide the retailer goods and services while it restructures and permission for stores to cease accepting gift cards and returns.
The Body Shop Canada made about $12 million before interest and taxes in the key holiday shopping period from the start of November 2023 to the end of January 2024, which wound up with The Body Shop International, Searle said.
Searle said the parent company had taken $42.9 million from The Body Shop Canada’s accounts over that period and remitted $21.8 million for payables and payrolls.
Searle called the administration filing “quite a shock” and said the day it was made, he learned The Body Shop International would no longer continue cash pooling.
By then, The Body Shop Canada owed $3.3 million to landlords, utilities and logistics providers, insurers and marketing agencies. The Body Shop U.S. has about US$3.3 million in overdue payments, Searle said.
The Body Shop Canada felt it had to file for creditor protection last week because it was “faced with mounting debt, no prospect of assistance from the U.K. parent or Aurelius or return of its funds, and an inability to fulfil e-commerce orders,” he said.
“But for the improper withholding of the company’s funds, The Body Shop Canada would be able to pay all its obligations in full.”
The Body Shop U.S. announced it would cease operations on Friday. The Body Shop Canada is so integrated into the U.S. business that the closure will make it “exceedingly difficult” for the Canadian arm to access inventory from its shuttering U.S. warehouse and process future requests, Searle said.
The company has also lost the ability to ship to its wholesale customers, Shoppers Drug Mart and Amazon.ca.
Shoppers Drug Mart has stocked Body Shop products since last summer, when the companies announced a partnership that would see merchandise, including its popular body butters, hit 25 stores. Another 25 locations were expected to roll out products this year.
The partnership marked the first time Body Shop products were sold in Canada outside the company’s stores.
This report by The Canadian Press was first published March 4, 2024.
MONTREAL – Travel company Transat AT Inc. reported a loss in its latest quarter compared with a profit a year earlier as its revenue edged lower.
The parent company of Air Transat says it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31.
The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.
Revenue in what was the company’s third quarter totalled $736.2 million, down from $746.3 million in the same quarter last year.
On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.
Transat chief executive Annick Guérard says demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty.
This report by The Canadian Press was first published Sept. 12, 2024.
Dollarama Inc.’s food aisles may have expanded far beyond sweet treats or piles of gum by the checkout counter in recent years, but its chief executive maintains his company is “not in the grocery business,” even if it’s keeping an eye on the sector.
“It’s just one small part of our store,” Neil Rossy told analysts on a Wednesday call, where he was questioned about the company’s food merchandise and rivals playing in the same space.
“We will keep an eye on all retailers — like all retailers keep an eye on us — to make sure that we’re competitive and we understand what’s out there.”
Over the last decade and as consumers have more recently sought deals, Dollarama’s food merchandise has expanded to include bread and pantry staples like cereal, rice and pasta sold at prices on par or below supermarkets.
However, the competition in the discount segment of the market Dollarama operates in intensified recently when the country’s biggest grocery chain began piloting a new ultra-discount store.
The No Name stores being tested by Loblaw Cos. Ltd. in Windsor, St. Catharines and Brockville, Ont., are billed as 20 per cent cheaper than discount retail competitors including No Frills. The grocery giant is able to offer such cost savings by relying on a smaller store footprint, fewer chilled products and a hearty range of No Name merchandise.
Though Rossy brushed off notions that his company is a supermarket challenger, grocers aren’t off his radar.
“All retailers in Canada are realistic about the fact that everyone is everyone’s competition on any given item or category,” he said.
Rossy declined to reveal how much of the chain’s sales would overlap with Loblaw or the food category, arguing the vast variety of items Dollarama sells is its strength rather than its grocery products alone.
“What makes Dollarama Dollarama is a very wide assortment of different departments that somewhat represent the old five-and-dime local convenience store,” he said.
The breadth of Dollarama’s offerings helped carry the company to a second-quarter profit of $285.9 million, up from $245.8 million in the same quarter last year as its sales rose 7.4 per cent.
The retailer said Wednesday the profit amounted to $1.02 per diluted share for the 13-week period ended July 28, up from 86 cents per diluted share a year earlier.
The period the quarter covers includes the start of summer, when Rossy said the weather was “terrible.”
“The weather got slightly better towards the end of the summer and our sales certainly increased, but not enough to make up for the season’s horrible start,” he said.
Sales totalled $1.56 billion for the quarter, up from $1.46 billion in the same quarter last year.
Comparable store sales, a key metric for retailers, increased 4.7 per cent, while the average transaction was down2.2 per cent and traffic was up seven per cent, RBC analyst Irene Nattel pointed out.
She told investors in a note that the numbers reflect “solid demand as cautious consumers focus on core consumables and everyday essentials.”
Analysts have attributed such behaviour to interest rates that have been slow to drop and high prices of key consumer goods, which are weighing on household budgets.
To cope, many Canadians have spent more time seeking deals, trading down to more affordable brands and forgoing small luxuries they would treat themselves to in better economic times.
“When people feel squeezed, they tend to shy away from discretionary, focus on the basics,” Rossy said. “When people are feeling good about their wallet, they tend to be more lax about the basics and more willing to spend on discretionary.”
The current economic situation has drawn in not just the average Canadian looking to save a buck or two, but also wealthier consumers.
“When the entire economy is feeling slightly squeezed, we get more consumers who might not have to or want to shop at a Dollarama generally or who enjoy shopping at a Dollarama but have the luxury of not having to worry about the price in some other store that they happen to be standing in that has those goods,” Rossy said.
“Well, when times are tougher, they’ll consider the extra five minutes to go to the store next door.”
This report by The Canadian Press was first published Sept. 11, 2024.
TORONTO – The U.S. Consumer Financial Protection Bureau has ordered TD Bank Group to pay US$28 million for repeatedly sharing inaccurate, negative information about its customers to consumer reporting companies.
The agency says TD has to pay US$7.76 million in total to tens of thousands of victims of its illegal actions, along with a US$20 million civil penalty.
It says TD shared information that contained systemic errors about credit card and bank deposit accounts to consumer reporting companies, which can include credit reports as well as screening reports for tenants and employees and other background checks.
CFPB director Rohit Chopra says in a statement that TD threatened the consumer reports of customers with fraudulent information then “barely lifted a finger to fix it,” and that regulators will need to “focus major attention” on TD Bank to change its course.
TD says in a statement it self-identified these issues and proactively worked to improve its practices, and that it is committed to delivering on its responsibilities to its customers.
The bank also faces scrutiny in the U.S. over its anti-money laundering program where it expects to pay more than US$3 billion in monetary penalties to resolve.
This report by The Canadian Press was first published Sept. 11, 2024.
