Brazil’s Natura considers Body Shop sale

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Brazilian cosmetics group Natura said it was studying a possible sale of The Body Shop, after struggling to turn round the fortunes of the UK retailer.

The beauty conglomerate announced on Monday that it was exploring “strategic alternatives” for its British skincare unit, which it acquired in 2017 from L’Oréal in a deal valued at €1bn. One of the options may include a divestment. 

Natura, which has faced difficulties following a corporate buying spree in recent years, could also be considering selling other assets, according to people briefed about the matter.

The Body Shop was founded in 1976 by the late environmental campaigner Anita Roddick and her husband Gordon, and became a pioneer in the field of ethical consumerism.

Styling itself as an alternative to traditional cosmetics, the brand’s identity was tied to its principled stances on issues, including opposition to animal testing.

The Body Shop has 10,000 employees across 3,000 stores in about 70 countries, according to its website. However, the business has suffered in recent times as sustainability has gone mainstream, increasing competition.

After a couple years of improved performance, The Body Shop’s financial figures once again disappointed investors and analysts in 2022.

The difficulties have continued as net revenue dropped 12 per cent year-on-year to R$800mn ($164mn) in the second quarter, though its core profits swung back into the black. Earnings before interest, tax, depreciation and amortisation stood at R$23.3mn.

Natura’s purchase of The Body Shop from France’s L’Oréal was a crucial element in its global expansion drive, followed by the takeover of door-to-door seller Avon Products two years later.

But the São Paulo-based company’s international efforts have largely foundered, leading its management to break up what was at one point the world’s fourth-largest pure-play beauty group.

Earlier this year, the Brazilian parent sold its high-end Australian cosmetics maker Aesop to L’Oréal in a $2.5bn deal. Natura has now shifted focus to integrating its eponymous brand and Avon in its home region of Latin America.

Citi analyst João Soares said he assumed “a conservative valuation” for The Body Shop of about five to seven times 2024 earnings, which the bank forecasts to be R$604mn.

“This is based on the profile of lower growth beauty players . . . and the fact that [it] is still struggling with profitability,” Soares wrote.

One banker said The Body Shop had already been presented to potential private equity investors. Natura said in its statement that “there can be no assurance that this process will result in any transaction”.

Shares in Natura initially rose 4.7 per cent on the local B3 exchange following the announcement. They settled 2.2 per cent higher on the day, giving the company a market capitalisation of R$21.6bn.