Yahoo Finance Body Shop landlords face rent cuts in battle to keep stores open
Administrators running The Body Shop are expected to demand rent cuts from its landlords as they race to secure a future for the collapsed business.
Insolvency experts at FRP Advisory are putting together plans for a Company Voluntary Agreement (CVA) in which property owners accept lower payments so the beauty chain can escape administration.
If an agreement can be reached, it would mean the company is able to continue trading without putting its remaining assets up for sale.
Landlords at the time of collapse included Land Securities Group, Network Rail, and Nuveen Real Estate, one of the largest investment managers in the world, as well as the shopping centre owner Hammerson.
CVAs, which have previously been used by a string of hospitality and retail businesses including Prezzo and Pizza Express, usually involve significant rent cuts to keep stores open.
They became especially common during the pandemic when retail outlets and restaurants were forced to shut because of lockdown restrictions.
If a CVA cannot be agreed with The Body Shop’s creditors, administrators will explore a sale of the business.
The Body Shop was put into administration in February by its owner, the private equity firm Aurelis, just weeks after being acquired in a £207m deal from Natura & Co.
Since then, dozens of stores have been forced to close, causing the loss of hundreds of jobs.
More than 80 of the chain’s shops have closed in total, including The Body Shop’s flagship Oxford Street site. It has been left with 116 still open across the UK.
In a message to creditors, first reported by Sky News, FRP said: “Following the completion of the acquisition it became apparent that the short-term cash position of the company was adverse to that that had been forecast, driven by poor results in the 2023 financial year and the unwinding of the company’s working capital.”
Aurelius had expected the chain to require around £63m in funding after the acquisition, but that figure rose to north of £100m, “significantly greater than the requirement identified as part of the acquisition process”, it added.
A $76m (£60m) revolving credit facility was also repaid in the weeks before Aurelius took over, it said.
These factors, combined with the chain’s poor performance, meant “that the shareholders could not commit to the required level of funding”.
Hundreds of the chain’s unsecured creditors have been left out of pocket and were owed more than £44.6m at the time of its collapse, the report said. FRP said there would be a dividend available to them if a CVA is approved.
It is understood there will be no further store closures if a deal can be struck.
Founded in 1979 by Dame Anita Roddick in Brighton, The Body Shop was one of the first retailers to pioneer an ‘ethical’ approach to beauty products that did not rely on animal testing.
However, over recent years it was outshone by newer rivals such as Lush and Rituals, which similarly marketed themselves around sustainability and ethics.
Despite the spate of closures, The Body Shop still has more stores on British high streets than Lush, which has about 100, and Rituals which had almost 70 last September and has since embarked on an expansion with plans to open a swathe in 2024.
