A precarious economic situation in the UK has led to numerous household name businesses going into administration. The Body Shop is the latest to succumb to the challenges facing retail companies in 2024.

Head of Insolvency and Asset Recovery Alex Jay spoke to The Times as the business confirmed it has formally fallen into administration, addressing what new owner Aurelius may or may not have known when acquiring the business in January 2024. Partner Tim Symes provided comments for City AM, Evening Standard and The Guardian on why the decision could have been taken to appoint administrators.

Working capital issues

Aurelius announced the decision to appoint administrators from FRP Advisory on 12 February, having come to the conclusion that The Body Shop’s finances were in worse shape than was initially apparent. FRP made the initial statement that The Body Shop had “faced an extended period of financial challenges under past owners, coinciding with a difficult trading environment for the wider retail sector”.

Sources told The Times that when the acquisition was first completed, “Aurelius was told that the company would have more working capital than expected to run the business. However, it was found to have a “bloated” cost structure”. Weaker than expected Christmas trading has also contributed to the decision.

Alex says: “The working capital issues may just be collateral from a poor Christmas trading period. However, trading must have been exceptionally bad to trigger administration so soon after acquisition.

If, in fact, Aurelius was misled about the likely working capital position — as is alluded to — it will no doubt look very closely at the sale process to understand how that arose.”

The future of the business

FRP has confirmed that for now, The Body Shop will continue to trade while in administration. The joint administrators will “now consider all options to find a way forward for the business and will update creditors and employees in due course.”

All businesses are facing challenges from a weak economy, the persistent weight of inflation and the higher interest rates that have followed. These factors have played a role in the decision to put The Body Shop into administration, and it is unlikely this will be the last large company to end up in this position.

Tim says: “This could be a tactical administration appointment designed to shed creditors and cut costs following the purchase by new owners just before Christmas, or the directors simply had no choice.

Putting the business through administration will give immediate respite from creditors and allow a leaner, viable business to emerge, albeit with substantial creditor casualties in the form of suppliers and landlords.

As with fellow British high street stalwart Wilko in the latter half of 2023, the business left standing is likely to be focussed on its online offering.”