NEW YORK — Just five months after a new, contemporary version of Sarah Michaels bath products hit retail shelves, the brand’s parent, Sarah Michaels LLC, was forced into an involuntary Chapter 11 bankruptcy in Delaware, according to the company. It subsequently filed in Chicago, where Sarah Michaels’ parent, The Hathi Group, is based.
This story first appeared in the May 9, 2003 issue of WWD. Subscribe Today.
The company, which makes and markets the Sarah Michaels, Freeman and San Francisco Soap beauty brands, said in its May 1 filing that its estimated liabilities are between $10 million and $50 million, the same range as its estimated assets. According to industry estimates, the three brands generated $85 million in 2002 sales. A statement supplied by the company, stated, “Even though the company’s sales have been strong, [we] faced tough hurdles including the K-Mart bankruptcy, excess inventory and problems inherited from previous owners. The company has already secured debtor-in-possession financing and continues to operate including supplying products to customers. The company is currently evaluating all its options including a sale of the entire company or certain brands. Due to the success of the Sarah Michaels’ relaunch and continued strength of the Freeman brand, the brands are expected to continue to thrive in the marketplace.”
In its filing, the firm also said that it had between 200 and 300 creditors. It expects to have funds available for distribution to unsecured creditors. Listed among its top 20 unsecured creditors are: Knowlton, Richford, Vt., $2.6 million; Tiro Industries Inc., St. Paul, Minn., $2.2 million; Arroyo, Lake Forrest, Calif., $1.3 million, and Dial Corp., Atlanta, $625,770.
The Hathi Group acquired the Sarah Michaels and Freeman beauty brands from The Dial Corp. in August 2001 for an undisclosed amount, beating out a number of bidders, including Miami Lakes, Fla.-based Solar Cosmetics Labs, the maker of NO-AD beauty products. Nuances within the specialty bath category, rather than Sarah Michaels’ various brands, are being blamed for the recent bankruptcy filing.
According to Bob Sheasby, executive vice president of sales and marketing for Solar Cosmetics Labs, “I think specialty bath, especially gift bath, requires a certain set of skills and an appreciation for the business that everybody in the business knows. People who don’t know the subtle intricacies of the business,” such as stringent logistic timetables to meet the needs of time-sensitive promotional offers, are bound to fail.
Apparently, Sarah Michaels has not lost its luster: bids for the business abound. According to sources, Solar Cosmetics is interested in acquiring the Sarah Michaels and San Francisco Soap businesses. Sheasby, who would not comment on the speculation, managed the San Francisco Soap business when it was owned by JB Williams before the brand was sold to The Hathi Group in March 2002. Sheasby joined Solar Cosmetics a year ago.
The Freeman family is reportedly interested in buying the Freeman-branded business of Sarah Michaels. According to Larry Freeman, founder of Freeman Cosmetics, who in 1998 sold the brand to The Dial Corp. for a reported $80 million, confirmed that it it was “reasonable to assume that we would be interested” in acquiring the brand.
Sources also named private financial institutions as courters of the Sarah Michaels businesses.