Brazil’s Natura considers Body Shop sale

Brazilian cosmetics group Natura has said that it is examining the possibility of selling The Body Shop after failing to improve the fortunes of UK retailer.

The beauty conglomerate announced on Monday that it is exploring “strategic options” for its British skin care unit, which was acquired from L’Oreal last year in a deal worth €1bn. One option could be to divest.

According to sources briefed on the issue, Natura could be looking at selling off other assets.

The Body Shop, founded in 1976 by Anita Roddick (late environmental activist) and Gordon Roddick (her husband), was a pioneer of ethical consumption.

The brand, which marketed itself as a natural alternative to conventional cosmetics, was based on its principles, such as opposition to animal tests.

According to its website, The Body Shop employs 10,000 people in 3,000 stores across 70 countries. The business has been hurt in recent years as sustainability became mainstream and increased competition.

The Body Shop disappointed analysts and investors in 2022 after a few years of improving performance.

In the second quarter of 2016, the company’s net revenue fell 12 percent year-on-year, to $800mn (about $164mn). However, its core profits returned to the black. Earnings were $23.3mn before interest, taxes, depreciation, and amortization.

The Body Shop was purchased by Natura from France’s L’Oreal in a move that helped it expand globally. Two years later, Avon Products was acquired.

The Sao Paulo company’s efforts to expand internationally have mostly failed, which has led its management team to disband what was once the fourth largest pure-play beauty group in the world.

In a deal worth $2.5 billion , the Brazilian parent company sold Aesop, a high-end Australian cosmetics manufacturer to L’Oreal earlier this year. Natura is now focused on integrating Avon and its own brand in Latin America.

Citi analyst Joao Sares stated that he had assumed “a conservative value” of The Body Shop, based on a five-to-seven times earnings forecast by the bank for 2024. The bank estimates this to be $604mn.

This is based upon the profile of beauty players with lower growth rates. . . Soares wrote:

A banker told me that The Body Shop was already presented to private equity investors. Natura stated in its statement “there is no guarantee that this process will lead to any transaction”.

Following the announcement, shares in Natura rose initially by 4.7 percent on the local B3 stock exchange. The shares closed the day 2.2 percent higher, giving the company’s market capitalisation a value of $21.6bn.

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