L’Oréal may be considering cutting its losses with The Body Shop, after ten years of ownership.
The company is rumoured to be in talks with bankers at Lazard, according to The Financial Times, about options for an outright sale.
L’Oréal told Cosmetics Business it was not commenting on the rumour.
The French cosmetics conglomerate bought The Body Shop back in 2006 for £652m.
Financial concerns
However, over the past few years the cruelty-free brand and retailer has struggled financially.
The Body Shop’s first half is “never significant” in profitability terms, L’Oréal has previously admitted.
The brand saw H1 2016 sales of €12.89bn, up 0.6% on a reported basis from H1 2015. However, in Q2 2016, reported sales were down 0.6% on the previous year.
Trailing behind
At the time, L’Oréal confirmed that while expansion was continuing in the brand’s main markets of the UK, Australia and Canada, the economic slowdown in Hong Kong and Saudi Arabia was impacting business negatively.
Nicholas Micallef, Senior Industry Analyst – Beauty and Personal Care, Euromonitor International, said: “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.
"As the French owner of a British brand, pulling the plug off the UK is probably too controversial, given The Body Shop’s British legacy."
He added: "The company’s focus is to conquer China, which has been doing successfully with Garnier, launching the Ultra Doux line in 2016. Moreover, its 2014 acquisition of Magic Holdings, has yet to yield better results, and making this acquisition a worthwhile venture requires more efficient use of the company’s resources.
"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.”
As of 30 June 2016 the brand was available in 3,047 doors.
But it’s not all bad news. According to Which?’s last survey of the UK’s 100 biggest brands in 2015, The Body Shop ranked in joint fourth place with John Lewis and Waitrose for customer service.
