BH Cosmetics' $14M turnaround and celebrity lines missed — Chapter 11 with $4.3M bid

BH Cosmetics, a Los Angeles-based colour-cosmetics brand founded in 2009 and acquired by private equity in 2018, filed for Chapter 11 in Delaware in January 2022. According to filings cited by Retail Dive, it had begun a turnaround in 2019 meant to re-charge sales.

New management called 2020 a transition year, shifting toward new product development, direct-customer retention, inventory right-sizing and building the infrastructure for wholesale channels. The company estimated that the revamp would cost about $14M. In 2021 it carried on with partnerships with rappers Iggy Azalea and Doja Cat, with products sold on its website and through Ulta stores. It was forced to delay the launch of a natural skin care brand, Itsa, and sales of the two celebrity lines fell short of expectations.

The company blamed pandemic-related changes in beauty routines, saying revenue dropped from $55.8M in 2019 to $33.6M in 2020. It owed $23.5M in debt and about another $15M in unpaid rent and other expenses. Efforts to sell its inventory and intellectual property produced a stalking horse bid of about $4.3M.

Revenue fell from $55.8M (2019) to $33.6M (2020); $23.5M debt plus about $15M unpaid rent and expenses; stalking horse bid about $4.3M.

Revenue dropped by about 40% between 2019 and 2020, which the company attributed to pandemic changes in beauty routines.

New management spent an estimated $14M on a turnaround covering product development, inventory and wholesale infrastructure, while sales were falling.

The Iggy Azalea and Doja Cat lines, sold on its site and at Ulta, fell short of expectations.

The Itsa skin care launch was delayed, so the planned growth product did not arrive.

A turnaround that funds new launches before the core business stabilises leaves little room for misses. Celebrity collaborations do not make up lost revenue by themselves.

BH Cosmetics sought to sell most of its inventory and intellectual property, with a stalking horse bid of about $4.3M against $23.5M of debt. Retail Dive's report does not cover the final buyer or price.