Advertisement

The Body Shop shutters Wake County warehouse after private equity firm buys parent company

Employees of The Body Shop distribution center in Wake Forest learned Friday morning they would be out of jobs, effective that day, as the cosmetic company lacked funds to continue operating.

The closure, which plunged roughly 60 local workers into unemployment without severance or formal warning, came two months after the United Kingdom-based parent company The Body Shop International was acquired by a private equity firm and subsequently went into administration, an insolvency process under British law.

“It’s just not fair,” said Nataly Guerra, who had been an operations supervisor at the Wake County facility for eight years.

Early Friday, Guerra and her employees were asked to come to the warehouse, where they were given a letter explaining what had occurred. The letter, obtained by The News & Observer, was written by Jennifer Wale, the Raleigh-based people director of The Body Shop North America. One employee said Wale started crying as she began to read it aloud.

Wale said in the letter the circumstances leading to the closure “were not reasonably foreseeable” and “were beyond the Company’s control.” Under federal law, employers must file a WARN notice with the state and give workers 60 days notice if an entire plant shuts and affects at least 50 employees. But companies may be exempt from this requirement if a closure was due to “unforeseeable business circumstances.”

“This action is expected to be permanent,” she wrote.

Wale in her message blamed both U.K. administrators and the German private equity firm Aurelius Group, which acquired The Body Shop International for $261 million in January. This was about one-fifth of what the company sold for in 2017. According to reports in The Telegraph and other British outlets, Aurelius allegedly realized The Body Shop’s finances were “in a worse state than expected” after completing its deal with the previous owner, the Brazilian cosmetic conglomerate Natura & Co.

The Body Shop was founded in 1976 and markets cruelty-free beauty and skin care products not tested on animals. The cosmetics giant L’Oréal owned the company until seven years ago, when it was sold to Natura.

U.S. operations ‘immediately cut off’

On Feb. 13, The Body Shop International filed for administration and appointed the firm FRP Advisory to assume control of its affairs.

Wale in her letter said she had believed administration would only impact the company’s British operations — not The Body Shop’s respective subsidiaries in Canada and the United States. In the message to employees, she cited U.K. administrators saying as much.

But from across the Atlantic, FRP Advisory halted funding to The Body Shop in the United States.

“Contrary to their public statements, the UK Administration resulted in a catastrophic situation for the Company because all funding for the Company and its U.S. operations were immediately cut off, with no advance notice,” Wale wrote on March 1.

In the lead-up to Friday’s announcement, she said her team had asked the private equity owner to intervene but was disappointed.

“Aurelius remained silent in the face of all urgent requests for the Company, even though aware of catastrophic consequences for North America,” Wale wrote.

In a phone call with The N&O on Monday, an Aurelius spokesperson noted all business decisions concerning The Body Shop in North America were made by the U.K. administrators.

The Body Shop distribution center in Wake Forest, North Carolina.
The Body Shop distribution center in Wake Forest, North Carolina.

“This is not Aurelius’s decision,” said Methuselah Tanyanyiwa, a director at the business consulting firm Dentons Global Advisors.

Yet even before The Body Shop International filed for administration, local operations had started to be interrupted said Christian Rooney, who directed planning and transportation at the distribution center north of Raleigh. In January, the month Aurelius completed its acquisition, Rooney began fielding calls from packaging suppliers and other vendors who said The Body Shop wasn’t paying them.

“Just slowly and slowly, each vendor stopped offering us any services,” he said.

Rooney said employees asked management on Friday about the lack of a 60-day WARN notice. They were told the sudden action had been cleared by the company’s legal team.

According to The Telegraph, FRP Advisory is investigating a claim regarding unaccounted funds “predating the business’s sale to private equity group Aurelius.” Reporting in the Financial Times highlighted Aurelius is also a significant creditor in The Body Shop, which positions the private equity firm to buy back the company once it leaves administration smaller and rid of debt. The article said the firm is “unlikely to lose money” regardless of what comes next for The Body Shop.

In North Carolina on Monday, former employees were sorting through these financial maneuvers, figuring out where to direct their fury. Some looked at the new owner.

“I think Aurelius really treated us wrong, completely,” Guerra said.

Guerra’s wife also worked at the Wake Forest warehouse. They’re now both out of jobs.

Open Source

Do you enjoy Triangle tech news? Subscribe to Open Source, The News & Observer's weekly technology newsletter and look for it in your inbox every Friday morning. Sign up here.