The company bet on celebrity collaborations with Doja Cat and Iggy Azalea to propel sales.
BH Cosmetics has filed for bankruptcy. It has recently launched makeup lines collaborated with Doja Cat and Iggy Azalea.
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 papers that it hired Hilco Streambank and has signed a purchase agreement with RBI Acquisition Holdings LLC as the stalking-horse bidder for the assets. A pre-petition sale attempt, where the company hired a banker to sell itself starting in September, did not work out, the company wrote in court papers.
“The debtors’ declining revenues are 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, BH had between $50 million and $60 million in net sales, and was very profitable.
But in court papers, BH said it faced “increased competition” in the beauty category, and that attempts to maintain market share eroded profitability. “The debtors have also struggled to obtain profitability after pursuing an ultimately unsuccessful launch of various product lines,” BH’s chief restructuring officer, Spencer Ware from Riveron Management, wrote in a declaration.
In 2019, the company brought in a new management team that suggested using 2020 as a transition year. But the COVID-19 pandemic had major consequences for BH, which sells eye shadow palettes and makeup brushes, and sales dropped from $55.8 million in 2019 to $33.6 million in 2020.
BH delayed the launch of a planned skincare line, called Itsa, in order to focus on celebrity collaborations with Doja Cat and Iggy Azalea, the company said in court papers. But the launch of those lines “fell below expectations,” Ware said in court papers, and BH hired Riveron as a turnaround adviser.
BH owes $9.6 million on a term loan, and $13.9 million on a revolving loan, the company said in court papers. The company also has large creditors based in China, including Dongguan Fay Cosmetic Brushes Co., Beauty Beyond Industry Ltd. and Shenzhen Colorl Cosmetic Products Co., which are each owed more than $1 million.