Pat McGrath Labs Faces Legal Hurdles: Makeup Brand Files for Bankruptcy

Pat McGrath Labs takes a definitive turn in its trajectory. The brand owned by the eponymous star makeup artist has filed for Chapter 11 bankruptcy protection, the U.S. equivalent of insolvency proceedings in Spain. Thus, the sale of assets that the company had planned for Tuesday will be postponed indefinitely.

According to WWD, the company will continue to operate while it negotiates with its creditors a restructuring plan for its debt, estimated at between 50 million and 100 million dollars. The company had planned to carry out a sale of its assets on Tuesday, based on a drop in sales and valuation.

Immersed in restructuring and recapitalization processes, Pat McGrath Labs had hoped to “align” its financial framework with the “enduring strength and creative leadership of the brand” by refocusing its situation earlier this year. Its entry into competition comes at a time of high visibility for its founder, albeit outside her own company. Most recently, McGrath has taken over the creative direction of makeup for La Beauté de Louis Vuittton, the French maison’s beauty project.

Makeup artist Pat McGrath recently took over the creative direction of makeup for LVMH’s La Beauté.

Pat McGrath launched the brand in 2015 after decades of positioning herself as one of the most influential makeup artists on the fashion week circuit. Her commercial debut came with Gold 001, a $40 multipurpose gold pigment sold in limited edition. That first launch sold 1,000 units in six minutes through its website, according to the story released at the time. That launch set the tone for a strategy based on drop-type launches with carefully designed product and packaging aesthetics.

In 2018, Pat McGrath Labs raised $60 million from Eurazeo Brands. At the time, market sources estimated that the investor took between 5% and 8% of the capital, with a valuation above $1 billion. Over the years, and in a context of operational difficulties, this valuation would have been substantially reduced. According to industry sources, Eurazeo quietly sold its stake a few years ago.

The brand, with distribution in chains such as Sephora and Ulta Beauty, has gone through a period of internal adjustments, changes in the management team and staff cuts in recent years. According to market sources, sales were around $50 million last year, well below the volume that the industry associated with the company during its peak of expectations.