Will L’Oréal sell The Body Shop?

By Lucy Whitehouse

- Last updated on GMT

Will L’Oréal sell The Body Shop?

Related tags Body shop Sales

The global beauty giant is said to be considering a £1bn sale of the ethical British skin care business, as the retail unit continues to slump in contrast with L’Oréal’s wider performance.

According to the Financial Times,​ the French beauty multinational is working with bankers at Lazard on a review of its options for the unit.

The FT describes a sale as ‘among the most likely outcomes’, according to two people close to the issue. It would see the retail unit sold 11 years after L’Oréal purchased it in 2006 for £652.3m.

It comes ahead of L’Oréal’s annual results for 2016, expected this week, within which the company is expected to announce that it has undertaken a strategic review of The Body Shop.

A win-win move?

The Body Shop has been struggling lately: in the first half of 2016, like-for-like sales at the Body Shop fell 0.6% year on year, reaching €398.6m. Operating losses grew to €22.2m from €7.2m.

On the topic of L’Oréal’s potential upcoming sale, commentators suggest it would likely be a savvy move for both the parent company and The Body Shop.

Nicholas Micallef, Senior Industry Analyst – Beauty and Personal Care, Euromonitor International, says: “L’Oréal’s planned divestment of The Body Shop is perhaps unsurprising. While the company’s numerous brands advanced ahead in its key four divisions, in particular, the Luxe, Active Cosmetics and Professional divisions, The Body Shop trailed behind​.

“In its home and largest market, the UK, growth has remained rather flat, hovering around 1% in recent years, in comparison to 2-3% for the total company. The Body Shop performed more strongly in Asian markets, such as India and Indonesia, where it achieved a double-digit CAGR over 2010-2015.

“The Body Shop is better suited in the hands of a beauty player seeking a lower-cost debut in Asia, and can take on the British brand as a stepping stone into the region​,” he concludes.

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