BH Cosmetics files under Chapter 11 - The Entrepreneurial Way with A.I.


Friday, January 21, 2022

BH Cosmetics files under Chapter 11


Dive Brief:

  • After stepping up its marketing and product development last year, indie beauty brand BH Cosmetics last week filed for Chapter 11 in the U.S. Bankruptcy Court for the District of Delaware, according to court documents.

  • BH Cosmetics' efforts to sell its assets, including most of its inventory and intellectual property, have resulted in a stalking horse bid for about $4.3 million, according to another filing.

  • The company blamed changes to beauty routines brought on by the pandemic as a reason for its filing, saying its revenue dropped from $55.8 million in 2019 to $33.6 million in 2020.

Dive Insight:

The COVID-19 pandemic has been rough for beauty sales, especially during the pre-vaccine lockdown period of 2020. Even now, masks are still an important way to stymie the spread of the disease, and many in-person meetings and gatherings remain scaled back.

But it was especially bad timing for DTC company BH Cosmetics, which was founded in 2009 and acquired by private equity in 2018. The Los Angles-based company, a millennial and Gen Z favorite, specializes in "high quality, clean, vegan, and cruelty-free cosmetics and other beauty products, with a specialty in color cosmetics, brushes for the application of cosmetics, and eyelashes." In its court papers, the company said that in 2019 it embarked on a turnaround meant to re-charge sales.

The new management pegged 2020 as a transition year, when it would redirect the company toward growth through "new product development and unique strategies to obtain and retain direct customers, right size the inventory through connecting and efficiently utilizing the Company’s distribution and sales systems, and develop the infrastructure needed to sell product to various wholesale channels," according to an affidavit from Spencer Ware, chief restructuring officer and co-CEO of BH Cosmetics Holdings. At the time the company estimated it would take about $14 million to support the revamp, per that filing.

The company carried on with its plans into last year, forging partnerships with Australian rapper Iggy Azalea and American rapper Doja Cat, both featuring products to be sold on its website and through Ulta stores. But it was forced to delay the introduction of a natural skin care brand, Itsa, and sales of the two celebrities' items fell short of expectations.

BH Cosmetics is $23.5 million in debt and owes about another $15 million in unpaid rent and other expenses, per the filings.


Daphne Howland, Khareem Sudlow