L'Oréal may sell The Body Shop, and it's partly Hong Kong's fault

In the FY2016 financial released published yesterday evening,  Jean-Paul Agon, L'Oréal chairman and chief executive, disclosed that the group was considering putting The Body Shop up for sale.

"As part of this brand portfolio optimisation, it has been decided to explore all strategic options regarding The Body Shop's ownership in order to give it the best opportunities and full ability to continue its development," Agon said. "No decision has been taken so far."

On Wednesday, it was reported that L'Oréal was considering selling off The Body Shop for €1 billion due to the retail brand's poor performance. 

In 2016, The Body Shop’s sales dropped by 4.8 percent to €920.8 million, a dark spot in the group’s otherwise positive results.

Overall, the group’s sales increased 2.3 percent to €25.83 billion last year which drove its net profit up by 4.5 percent to €3.65 billion.

While The Body Shop’s sales have been good in Europe, especially in the UK, it has been struggling in Saudi Arabia and Hong Kong, which is impacting overall performance, said the group’s financial statement.

Sales by region

Sales in Western Europe held steady for L'Oréal, registering an 0.5 percent increase to €8 billion.  The UK and Spain had a "particularly dynamic year" for the group. Overall, makeup was the top growth driver in the region, "fuelled by NYX Professional Makeup and Urban Decay", said the report.

The strongest sales growth for the group was in North America where sales grew 6.7 percent to €7.1 billion last year. Strongest performing luxury brands in the market were Urban Decay, Yves Saint Laurent, Lancôme and IT Cosmetics. Within the consumer products division, Garnier’s latest launches, Whole Blends(Ultra Doux) and Micellar Cleansing Waters, have sold well.

Eastern Europe registered the next strongest growth with 2.7 percent, followed by Asia-Pacific at 1.8 percent

Within Asia, while L'Oréa’s luxury division continues to perform well in China, its consumer products division has been slowed by difficulties with the brand Magic, and the adjustment of distribution channels. Otherwise, Taiwan and South Korea posted strong growth, as did Southeast Asia, particularly in Australia and Indonesia.

The group is however struggling in Latin America where sales dropped 1.8 percent to €1.83 billion.

Luxury outperforms

L'Oréal’s Luxe division grew 6 percent to €7.66 billion last year on the back of strong sales from Yves Saint Laurent, Giorgio Armany and Urban Decay. Kiehl’s and Lancôme too are both doing well, reported the group.

According to the statement, the division recorded "double-digit growth" in China, Japan, Russia and several countries in South-East Asia. Western Europe "performed very well, especially Spain and the United Kingdom".