Bloomberg Anywhere Remote Login Bloomberg Terminal Demo Request


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

Body Shop Fails to Return $1 Billion to ’06 Shareholders: Retail

The L'Oreal SA company headquarters stand in Paris. Photographer: David Levenson/Bloomberg
The L'Oreal SA company headquarters stand in Paris. Photographer: David Levenson/Bloomberg

The Body Shop was ahead of its time in using natural ingredients and getting customers to recycle packaging. Five years after L’Oreal SA paid $1 billion for the retailer, shareholders are still waiting for a payoff.

The maker of 12.50-pound ($19.68) Candied Ginger Body Butter, founded 35 years ago as the green alternative to mainstream cosmetics, has struggled amid competition from Tesco Plc to Lush, the Poole, England-based maker of handmade soaps and face creams. The Body Shop failed to react to louder and more ambitious claims by these and other rivals, said Vivienne Rudd, senior European beauty analyst at Mintel International.

“It doesn’t seem to have a unique selling point anymore and that’s hard to get back once it’s gone,” Rudd said.

Sophie Gasperment, who joined the Body Shop as chief executive officer in 2008, wants to change that. The London-based company, which has more outlets than Hennes & Mauritz AB, the owner of H&M stores, will redesign stores next year to showcase the origins and potency of its formulas as well as introduce new packaging and products including the Chocomania bath and body range.

L’Oreal chairman and CEO Jean-Paul Agon expects the retailer, whose championing of human rights and fair trade once won customers by making them look and feel good, to match its owner’s sales growth by 2014. Revenue at the Body Shop, which accounted for 3.9 percent of L’Oreal’s total last year, rose 2.6 percent on a comparable basis in the first nine months of 2011 after declining in the previous three quarters. L’Oreal’s sales rose 5.1 percent in the period.

Underperforming Sales

L’Oreal, the world’s largest maker of cosmetics, bought the company for 652 million pounds in 2006. The Body Shop’s annual sales have fallen 4.1 percent since 2007 when they reached a record 786.9 million euros ($1.1 billion). L’Oreal’s revenue has gained 14 percent in the last three years.

Only Limited Brands Inc.’s Bath & Body Works has grown at a slower rate than the Body Shop since 2005 in terms of retail sales in dollars, according to an analysis of 12 beauty retailers by Planet Retail. The global beauty and personal care market is set to expand 5.5 percent to 304.7 billion euros this year and reach 387.3 billion euros by 2015, Euromonitor International estimates.

Starting with one store in 1976, founder Anita Roddick built the Body Shop into a chain that now has 2,657 outlets, about 10 percent more than H&M, the world’s second-largest clothing retailer. Roddick, who died in 2007, opposed animal testing, used natural ingredients such as mango and tea tree oil and encouraged customers to return plastic bottles for refills.

Taking Time

“It’s not always easy to refresh brands,” Agon said of the Body Shop in an interview in April. “It’s taking time.”

While the Body Shop’s natural and ethical stance helped set it apart at first, it hasn’t worked hard enough to reinvent itself as a relevant brand for young people, according to Matthew Stych, non-food research director at Planet Retail.

“They seem to be sticking pretty much with a core range of products over the last 10, 20 or 30 years and just innovating around the fringe,” Stych said. Lush, the closely held maker of 30-pound Ladyboy perfume, “is probably seen as more radical these days.”

Gasperment, who managed L’Oreal’s U.K. business before joining the Body Shop, halted expansion in 2008 and commissioned research to gauge perceptions of the brand. In the last two years, she has introduced organic lines and updated products like Hemp Hand Protector with Community Fair Trade ingredients. The store revamp marks “a step change” in the Body Shop’s strategy, Gasperment, 47, said in an interview.

Pilot Stores

“We’ve been doing some remarkable things for years but we probably weren’t communicating it in the right way before,” she said. “The stores are part of the brand expression.”

The Body Shop opened three pilot stores in London with pale wood floors, white walls and areas where consumers can test and learn about products. At one in Islington, maps show where ingredients come from and tags give information about suppliers and recommendations from staff. Space is also devoted to causes the retailer supports such as stopping child sex trafficking.

The format is working so far. On average, customers spend up to 10 minutes in the pilot stores, twice as long as in the chain’s other outlets, according to Gasperment. Since the first opened in May, the new shops are outperforming the retailer’s top 40 stores in the U.K. by mid-to-high single digit percentage, the CEO said. “Consumers have a huge appetite for storytelling,” she said.

Not in China

The Body Shop will open or refit about 80 stores in the new format from April in markets including the U.K., North America, Hong Kong and Russia. A company spokesman declined to quantify how much the rollout will cost, saying only that the prototypes had shown a very compelling return on investment.

Gasperment aims to meet Agon’s target also by opening more stores and expanding beyond the Body Shop’s 65 markets.

“There’s still a lot up for grabs,” she said, citing India, where the retailer operates 80 “very profitable” outlets, and Latin America, where it only sells in airports and duty free areas.

The Body Shop will open more stores in 2012 than the 132 it added in 2011, a company spokesman said. None of them will be in China because it requires animal testing.

Growth will also come online as the Body Shop introduces web loyalty cards and mobile commerce. Internet sales are surging 40 percent annually, representing more than 12 percent of revenue in the U.S. and just below that level in the U.K. and South Korea, Gasperment said.

“It will be 20 percent of the business in the medium term,” the CEO said, calling e-commerce a strategic priority. The Body Shop currently sells online in 16 countries.

Still, the Body Shop’s revival rests on its ability to be taken more seriously, Mintel’s Rudd said. The retailer evokes a sense of nostalgia among people who remember buying or receiving Christmas gift sets and many women start out by buying its hair care and fragrances. “But then there’s the perception that as they get older, they move onto other brands,” she said.

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.