The Body Shop Canada to close more stores as it prepares for new owner

The Body Shop Canada is due to be sold to a company led by the co-founder of frozen yogurt chain Yogen Früz. The exterior of a Body Shop store is seen in Toronto on Monday, March 4, 2024. THE CANADIAN PRESS/Chris Young

TORONTO — The head of the Body Shop Canada says more stores are due to close as the chain prepares to take on new ownership.

Jordan Searle said Thursday that there will be "a few more store closures," but most of the cosmetics retailer's 72-store footprint will remain open.

He declined to reveal the timeline for the closures, how many locations will be shuttered and the number of employees expected to lose their jobs.

"We're certainly very happy to successfully preserve the majority of The Body Shop stores across Canada," he told The Canadian Press in an interview.

News of the cuts comes as The Body Shop Canada is expected to change ownership in the next few days.

The chain will head to court on Friday to seek approval for a deal it recently signed to be bought by an affiliate of Serruya Private Equity Inc.

The Markham, Ont.-based firm's investments include St. Louis Bar and Grill, Second Cup and Swensen's. It is led by Yogen Fruz co-founder Michael Serruya, who did not respond to requests for comment.

The price Serruya's firm will pay for The Body Shop Canada was redacted from court documents but includes both cash and the assumption of certain liabilities. The Body Shop Canada's creditors are owed between $11.5 million and $12.5 million, court filings say.

If the sale receives approval at the Friday court hearing, the deal is expected to close on Monday.

The Body Shop Canada requires court approval for the sale because it has been involved in creditor protection proceedings since March.

That month, The Body Shop Canada revealed its U.K. parent company The Body Shop International, under its ownership of European private equity firm Aurelius, had stripped it of cash and pushed it into debt.

To cope, The Body Shop Canada closed 33 stores and laid off at least 200 workers in March.

The cuts left 72 locations open and triggered a spike in sales from customers fearing their beloved brand would soon be gone.

"There's a lot of love for The Body Shop out there," Searle said.

"We had a lot of customers not only voting with their dollars, but talking to our staff and saying, 'We really wouldn't know what to do if it's all closed. We love you guys."'

The Body Shop Canada struggled to meet the surge in demand because The Body Shop International owns its intellectual property and was its source of inventory.

At the same time, The Body Shop International had filed for administration -- a form of creditor protection in the U.K. -- and its new owner, a consortium led by French investment firm Aurea Group, wanted to continue the Canadian business through a franchise arrangement rather than a corporate subsidiary or a joint venture.

Court documents said Serruya intends to enter into a franchise agreement with the Aurea consortium before taking ownership of The Body Shop Canada.

Serruya's experience made it a logical fit for The Body Shop Canada, Searle said.

"They are retail veterans operating in a lot of the similar retail environments that we're in already. They understand the franchise model," said Searle, who will stay on to guide the company.

The new owners plan to reinstate The Body Shop Canada's e-commerce business, which ceased with the creditor protection proceedings, he said.

"It's all about making sure that The Body Shop brand is preserved for future generations here in Canada and keeping the brand strong," he said.

If Serruya wants to be successful with its acquisition, J.C. Williams Group retail strategist Lisa Hutcheson said the company will have to first remind customers that the retailer hasn't shut down.

Then, the new owner will have to focus on amping up the store experience, so shoppers feel The Body Shop's locations are worth visiting.

"People are wanting to shop in stores but they don't want boring stores and The Body Shops are pretty stores, but I think there needs to be another level of experience," she said.

The company could also do more to highlight that its beauty and skincare products are not tested on animals and developed through fair relationships with farmers and suppliers -- values that led late environmental activist Anita Roddick to found the brand in 1976.

Liza Amlani, co-founder of the Retail Strategy Group, had doubts that Serruya was the best company to handle such work because it has mostly focused on the yogurt, automotive and real estate businesses.

"Selling cars and yogurt does not provide you with operational expertise to revive The Body Shop," she said in an email.

She also pointed out that this isn't the first time someone has tried to reinvigorate the brand.

The Body Shop International was acquired in 2006 for 652 million pounds ($1.1 billion) by beauty giant L'Oreal, which later sold the company to Natura, the Brazil-based owner of Avon, in 2017 for one billion euros ($1.4 billion). Natura sold the firm to Aurelius.

"Anyone that had tried to revive the brand failed because they were not thinking about what the future of the brand could be in terms of connecting to their loyal and new customer," Amlani said.

"Customers are shopping elsewhere, buying brands that are innovative, inclusive and relevant."

This report by The Canadian Press was first published Dec. 12, 2024.