‘The Body Shop could be a lean, green retail machine once again’

Like a cracked refill bottle, The Body Shop has been leaking value lately.

In 2006, L’Oréal paid £652m for the ethical beauty specialist. Eleven years later, the valuation was up when Brazilian giant Natura paid £880m to add The Body Shop to its stable.

This week, though, Natura sold the business to private equity house Aurelius for £207m – and that includes a £90m conditional earn-out.

The low price tag highlights not just Natura’s need for a speedy sale as it refocuses on core businesses, but the challenge faced by the new owner as it seeks to restore The Body Shop’s fortunes and create value.

Aurelius said that it will parachute in its own “operational taskforce to partner with the highly experienced management team to optimise operations and develop the offering across channels”. So far, so private equity.

However, the retailer is not firing on all cylinders at present – Natura revealed this week that The Body Shop’s sales slid 13% in “another challenging quarter” – so it makes sense to ensure it is operating as efficiently as possible as an immediate priority.

The more interesting question is how, once operational improvements are made, growth can be delivered again.

“While companies promote their environmental credentials, concerns about greenwashing have grown – something unimaginable at The Body Shop, which could make far more of its ethical status”

The Body Shop was one of retail’s original disruptors. Ethics and sustainability were foundation stones of the business founded by Dame Anita Roddick, setting it miles apart in those respects from most of the industry.

Such values didn’t stop it from succeeding in the hardscrabble retail environment and it successfully floated.

In the years since, those characteristics are not quite so unique. Consumer interest in sustainability has rocketed, reflected in initiatives right across retail and given added momentum by the rise of the ESG agenda among corporations and investors.

However, The Body Shop is the original article. While companies promote their environmental credentials, concerns about greenwashing have grown – something unimaginable at The Body Shop, which could make far more of its ethical status in new ways. People familiar with the retailer see a variety of buttons that could be pushed.

While The Body Shop’s credentials seem unassailable, to some it seems not to have communicated that as successfully as in the past and using the new media opportunities heralded by the digital revolution.

It can come across as a business a bit too rooted in its heritage, a bit too 1980s, rather than telling a great story in ways that resonate now with contemporary consumers.

Some critics believe that the retailer’s recent campaign with Spice Girl Mel C was perhaps a bit of a nostalgic tie-up, rather than one that would engage a new generation of customers who would likely embrace The Body Shop ethos.

The Body Shop could seize further opportunities online, particularly by selling its products through wholesale channels.

The focus up until now has been on its own omnichannel operations but, increasingly, retailers and brands are going where the customers are, such as online marketplaces and partner sites.

“The retailer’s Battersea Power station branch is understood to have proved popular with customers and it – or its elements – could be replicated elsewhere”

One source familiar with The Body Shop believes there would be opportunity on sites such as Asos, Next or THG’s online beauty stores.

The Body Shop could also up the ante in store. The retailer’s Battersea Power station branch is understood to have proved popular with customers and it – or its elements – could be replicated elsewhere.

Characteristics of that store, such as the fact that 90% of it was made from recycled and sustainably sourced materials, and engaging events such as workshops, crystallise the retailer’s appeal.

The Body Shop faces plenty of competition – from direct rivals such as Lush through to new ‘clean’ beauty brands and in the gifting category from Rituals.

But if it can rekindle its spark, The Body Shop has the potential to stand out and be a lean, green retail machine again. If it does, Aurelius will have nabbed a bargain.