Forma Brands, the beauty incubator behind Morphe, Jaclyn Cosmetics and Ariana Grande’s REM Beauty, filed for Chapter 11 bankruptcy protection in Delaware, a week after Morphe announced it was closing its U.S. stores.
In a court filing, the company said its assets will be acquired by a group of creditors: Jefferies Finance LLC, Cerberus Capital Management LP and FB Intermediate Holdings LLC. Forma also secured about $33 million from lenders to continue operations.
An October report by Reorg Research, later confirmed by BoF, said Forma was exploring emergency financing options, including a potential Chapter 11 filing. At the time, Reorg Research estimated the company was $600 million to $700 million in debt.
Forma Brands is also set to lose one of its most high-profile beauty lines, REM Beauty.
Simon Cowell, president of Forma Brands, informed employees on Thursday that Forma and REM Beauty would also part ways, according to an internal email obtained by BoF.
“We have been in discussions with the REM Beauty team for some time about our future working relationship and the next chapter of the brand. We have come to a mutual decision that the brand will be best served under the ownership and operational leadership of the REM Beauty team,” Cowell’s email read.
Cowell said Forma intends to complete the transition within 45 days. During this time, the company will continue to sell remaining REM inventory online and ship to retail partners, which include Ulta Beauty.
In early 2021, the company negotiated a license to release makeup and skin care products for Grande, quickly putting a space-themed makeup collection into production. In November 2021, REM Beauty launched “Chapter 1: Ultraviolet” and has since introduced three more chapters.
According to several former Forma executives who spoke to BoF, the Grande-fronted line was considered a top priority at the company, with resources diverted from other brands to support REM’s marketing and distribution efforts. However, sales of the line did not meet expectations.
Cowell’s email said Forma will “prioritize our brands and channels that make the most sense for consumers, including Morphe and Morphe 2.”
Experts said the bankruptcy filing could be a “lifeline” for the struggling cosmetics company, which was once valued at more than $2 billion. Following a majority investment by private equity firm General Atlantic in 2019, Morphe relaunched a year later as an incubator for Forma Brands.
According to internal documents reviewed by BoF, Forma Brands was budgeted for more than $420 million in sales in 2021, but was on track to be about $80 million short of that figure. Morphe posted revenue of just $295 million in 2021, down from about $500 million in 2019, according to media reports.
The newly formed Forma Brands soon faced a series of setbacks, including the cosmetics slump; a pandemic that has de-prioritized makeup and Gen Z consumers with different beauty tastes and habits than Morphe’s millennial customers. Around the same time, Morphe distanced himself from longtime influencer collaborators Jeffree Star and James Charles, both embroiled in public feuds and controversies.
Plans to build other brands to stand alongside Morphe fell through. In 2020, Forma acquired Playa, a hair care line, and Lipstick Queen, a lipstick line, and introduced its own skin care and accessory lines. All met with lukewarm reception and disappointing sales.
In August 2020, the company launched a secondary Morphe line, Morphe 2, fronted by Charli and Dixie D’Amelio and aimed at Gen Z. A skin care line with Charli D’Amelio and a beauty brand with Demi Lovato were in development but never were not come to be General Atlantic declined to comment.
In December 2022, BoF announced that Playa founder Shelby Wild sued Morphe and General Atlantic in New York state court, alleging that the companies did not adequately support her line after the 2020 acquisition. In court documents, Wild claimed that General Atlantic discussed plans to turn the small but fast-growing Playa into a $50 million business within five years. According to internal documents reviewed by BoF, Forma projected $2 million in 2022 sales for Playa, up slightly from the previous year, and said it would “maintain new product development at Playa.” Sephora has confirmed that it has backed away from Playa in 2022.
“Over the past year, Forma Brands has implemented initiatives to stabilize our business and reposition our organization for long-term growth,” Simon Cowell, president of Forma Brands, said in a statement Thursday.