L'Oreal might sell The Body Shop as sales performance disappoints

L'Oreal has decided to explore all strategic options for The Body Shop, the British cosmetics and skin care company that it acquired in 2006 for £652m ($815.40m). The French cosmetics giant revealed the same in its 2016 annual results, published on Thursday (9 February).

The company said the move was part of its brand portfolio optimisation and would help give the Sussex-based retailer, "the best opportunities and full ability to continue its development." It however added that no decision had been taken on the same.

The Body Shop was founded in 1976 by social and environmental campaigner Anita Roddick and her husband Gordon. After acquiring it, L'Oreal had then hoped that the takeover will help get a strong foothold in the fast growing natural cosmetics market.

However, now the company seemed to be disappointed with the sales performance of The Body Shop, which has been its worst-performing business in recent years.

"We have decided with the board that it was time to explore all type of options regarding The Body Shop ownership. Despite all our efforts, we have been pretty disappointed by the results for the last two or three years, both in terms of sales and profitability," L'Oreal CEO Jean-Paul Agon was quoted as saying by the Wall Street Journal.

These statements confirm reports earlier this week that L'Oreal had appointed bankers to examine a potential sale of The Body Shop. Some private equity buyers are said to have already shown interest in buying the British brand.

The move comes alongside a decline in sales performance in 2016 at The Body Shop. L'Oréal's annual results showed that the UK firm's operating profit had declined 38% to €33.8m (£28.81m) in the year to 31 December 2016. Sales, too, were revealed to have seen a 4.8% year-on-year decline to €920.8m. However, on a like-for-like basis sales saw growth of 0.6%.

L'Oreal said that The Body Shop's momentum was good in Europe, especially in the UK and in Latin America. It added that the brand had also benefited from sustained growth in e-commerce and the launch of five new facial skincare masks. However, on the negative, it said the difficult context in Saudi Arabia and Hong Kong were continuing to have a negative impact on the brand's overall performance.

The Body Shop currently sells a range of 1,000 products in its 3,000 franchised stores across 66 countries.