BH Cosmetics, which recently created makeup lines with Doja Cat and Iggy Azalea, has filed for bankruptcy.
The cosmetics brand filed for Chapter 11 bankruptcy protection in Wilmington, Del., on Jan. 14, with plans to sell its intellectual property for $4.3 million.
BH sold its products online, as well as through Ulta Beauty and other retailers.
BH said in court documents that it hired Hilco Streambank and signed a purchase agreement with RBI Acquisition Holdings LLC as the bidder for the assets. An attempted pre-petition sale, where the company hired a banker to sell itself from September, did not work, the company wrote in court documents.
“The decline in debtor income is insufficient to support continued operations,” BH wrote in court documents. BH is majority-owned by MidOcean Partners, which initially invested in 2018. At that time, industry sources told WWD that BH had between $50 million and $60 million in net sales and was highly profitable.
But in court papers, BH said it faced “increased competition” in the beauty category, and attempts to maintain market share were eroding profitability. “The debtors also struggled to secure profitability after pursuing an ultimately unsuccessful launch of various product lines,” BH’s chief restructuring officer, Spencer Ware of Riveron Management, wrote in a statement.
In 2019, the company recruited a new management team who suggested using 2020 as a transition year. But the COVID-19 pandemic has had major consequences for BH, which sells eye shadow palettes and makeup brushes, and sales have fallen from $55.8 million in 2019 to $33.6 million. dollars in 2020.
BH delayed the launch of a planned skincare line, called Itsa, to focus on celebrity collaborations with Doja Cat and Iggy Azalea, the company said in court documents. But the launch of those lines “fell below expectations,” Ware said in court documents, and BH hired Riveron as turnaround counsel.
Many makeup brands struggled during the COVID-19 pandemic as consumers stayed home, wore masks and wore less makeup. At the same time, celebrities and influencers have created their own brands and product companies – a strategy that has moved away from the collaborative style beauty deals that were popular in 2016 and 2017 – although these celebrity brands have experienced varying levels of success.
BH owes $9.6 million on a term loan and $13.9 million on a revolving loan, the company said in court documents. The company also has major creditors based in China, including Dongguan Fay Cosmetic Brushes Co., Beauty Beyond Industry Ltd. and Shenzhen Colorl Cosmetic Products Co., which each owe more than $1 million.
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