Beauty Brands Files Chapter 11
As part of the bankruptcy process, Beauty Brands plans to close 25 stores.
Midwest beauty retail chain Beauty Brands has filed for Chapter 11 bankruptcy protection.
The chain filed in the U.S. Bankruptcy Court in the District of Delaware on Jan. 6, citing declining sales and rising costs of operating a brick-and-mortar retail business.
Hilco Merchant Resources LLC is acting as the stalking-horse bidder for the 33 Beauty Brands locations that will remain open and is slated to conduct the goingout-of-business sales for 23 locations, according to court papers. Beauty Brands is conducting the going-out-of-business sales for two locations — Ahwatukee, Ariz., and Lincoln, Neb. — on its own, according to a company spokesperson.
Beauty Brands is asking for additional bids to come in by Feb. 4, with an auction set Feb. 7 and sale hearing Feb. 8.
Beauty Brands, which is backed by private equity firm TSG Consumer Partners, has unsuccessfully attempted to reposition itself over the past few years. That process included spending to open 11 new locations, which have underperformed. In January, Beauty Brands chief executive officer Caryn Lerner acknowledged the retailer's troubles, but said the company was looking to hone in on the hair category to fuel growth.
For the fiscal year ended February 2018, Beauty Brands had $125 million in net sales. Of that, 70 percent was from retail products, and the other 30 percent came from services.
Beauty Brands hired Lazard in August to look for an infusion of capital or to sell some of its locations. That process “proved unsuccessful,” the company said in court papers, and the two interested parties didn't provide proposals that provided greater value than closing stores.
In December, Beauty Brands said it would close 25 stores and liquidate the inventory of those locations. The business plans to keep operating 33 stores as it goes through the Chapter 11 and sale process.
Also in December, the business defaulted on its pre-petition loan from PNC Bank NA. It owes $6.9 million on that facility, court papers show. Beauty Brands is asking the court to approve a $9 million revolving super-priority senior secured loan with PNC as its debtor-in-possession financing.
Beauty Brands' largest unsecured creditors include Starcom Mediavest Group, owed $471,627, Redken, owed $440,862, Fedex, owed $352,363, Bare Escentuals, owed $347,253, and Tarte, owed $323,400, court papers show.
Ashby & Geddes is acting as Beauty Brands' legal adviser for the restructuring, and Tim Boates of RAS management Advisors is chief restructuring officer for the company. Lazard Middle Market LLC is Beauty Brands' investment bank.