TORONTO — 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 £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.
Human Resources Officers must be very busy these days what with the general turnover of employees in our retail and business sectors. It is hard enough to find skilled people let alone potential employees willing to be trained. Then after the training, a few weeks go by then they come to you and ask for a raise. You refuse as there simply is no excess money in the budget and away they fly to wherever they come from, trained but not willing to put in the time to achieve that wanted raise.
I have had potentials come in and we give them a test to see if they do indeed know how to weld, polish or work with wood. 2-10 we hire, and one of those is gone in a week or two. Ask that they want overtime, and their laughter leaving the building is loud and unsettling. Housing starts are doing well but way behind because those trades needed to finish a project simply don’t come to the site, with delay after delay. Some people’s attitudes are just too funny. A recent graduate from a Ivy League university came in for an interview. The position was mid-management potential, but when we told them a three month period was needed and then they would make the big bucks they disappeared as fast as they arrived.
Government agencies are really no help, sending us people unsuited or unwilling to carry out the jobs we offer. Handing money over to staffing firms whose referrals are weak and ineffectual. Perhaps with the Fall and Winter upon us, these folks will have to find work and stop playing on the golf course or cottaging away. Tried to hire new arrivals in Canada but it is truly difficult to find someone who has a real identity card and is approved to live and work here. Who do we hire? Several years ago my father’s firm was rocking and rolling with all sorts of work. It was a summer day when the immigration officers arrived and 30+ employees hit the bricks almost immediately. The investigation that followed had threats of fines thrown at us by the officials. Good thing we kept excellent records, photos and digital copies. We had to prove the illegal documents given to us were as good as the real McCoy.
Restauranteurs, builders, manufacturers, finishers, trades-based firms, and warehousing are all suspect in hiring illegals, yet that becomes secondary as Toronto increases its minimum wage again bringing our payroll up another $120,000. Survival in Canada’s financial and business sectors is questionable for many. Good luck Chuck!. at least your carbon tax refund check should be arriving soon.
NORMAN WELLS, N.W.T. – Imperial Oil says it will temporarily reduce its fuel prices in a Northwest Territories community that has seen costs skyrocket due to low water on the Mackenzie River forcing the cancellation of the summer barge resupply season.
Imperial says in a Facebook post it will cut the air transportation portion that’s included in its wholesale price in Norman Wells for diesel fuel, or heating oil, from $3.38 per litre to $1.69 per litre, starting Tuesday.
The air transportation increase, it further states, will be implemented over a longer period.
It says Imperial is closely monitoring how much fuel needs to be airlifted to the Norman Wells area to prevent runouts until the winter road season begins and supplies can be replenished.
Gasoline and heating fuel prices approached $5 a litre at the start of this month.
Norman Wells’ town council declared a local emergency on humanitarian grounds last week as some of its 700 residents said they were facing monthly fuel bills coming to more than $5,000.
“The wholesale price increase that Imperial has applied is strictly to cover the air transportation costs. There is no Imperial profit margin included on the wholesale price. Imperial does not set prices at the retail level,” Imperial’s statement on Monday said.
The statement further said Imperial is working closely with the Northwest Territories government on ways to help residents in the near term.
“Imperial Oil’s decision to lower the price of home heating fuel offers immediate relief to residents facing financial pressures. This step reflects a swift response by Imperial Oil to discussions with the GNWT and will help ease short-term financial burdens on residents,” Caroline Wawzonek, Deputy Premier and Minister of Finance and Infrastructure, said in a news release Monday.
Wawzonek also noted the Territories government has supported the community with implementation of a fund supporting businesses and communities impacted by barge cancellations. She said there have also been increases to the Senior Home Heating Subsidy in Norman Wells, and continued support for heating costs for eligible Income Assistance recipients.
Additionally, she said the government has donated $150,000 to the Norman Wells food bank.
In its declaration of a state of emergency, the town said the mayor and council recognized the recent hike in fuel prices has strained household budgets, raised transportation costs, and affected local businesses.
It added that for the next three months, water and sewer service fees will be waived for all residents and businesses.
This report by The Canadian Press was first published Oct. 21, 2024.
TORONTO – A new report says many Canadian business leaders are worried about economic uncertainties related to the looming U.S. election.
The survey by KPMG in Canada of 735 small- and medium-sized businesses says 87 per cent fear the Canadian economy could become “collateral damage” from American protectionist policies that lead to less favourable trade deals and increased tariffs
It says that due to those concerns, 85 per cent of business leaders in Canada polled are reviewing their business strategies to prepare for a change in leadership.
The concerns are primarily being felt by larger Canadian companies and sectors that are highly integrated with the U.S. economy, such as manufacturing, automotive, transportation and warehousing, energy and natural resources, as well as technology, media and telecommunications.
Shaira Nanji, a KPMG Law partner in its tax practice, says the prospect of further changes to economic and trade policies in the U.S. means some Canadian firms will need to look for ways to mitigate added costs and take advantage of potential trade relief provisions to remain competitive.
Both presidential candidates have campaigned on protectionist policies that could cause uncertainty for Canadian trade, and whoever takes the White House will be in charge during the review of the United States-Mexico-Canada Agreement in 2026.
This report by The Canadian Press was first published Oct. 22, 2024.
