The Body Shop Faces Ownership Changes Amid Brand Devaluation

Brazilian cosmetics manufacturer Natura &Co announced on Tuesday that it has entered into a binding agreement to sell its subsidiary, The Body Shop, to the private investor Aurelius Group. The deal has been valued at £207 million, equivalent to approximately $254.32 million.

The divestment of The Body Shop marks Natura’s second significant business shift this year, demonstrating a “broader organizational shakeup.” Earlier in the year, Natura sold its luxury brand Aesop to L’Oreal, with the deal amounting to a substantial enterprise value of $2.53 billion.

In August, Natura declared that its board of directors had given the green light for the exploration of “strategic alternatives” for The Body Shop. This included the possibility of a sale, a decision that comes six years after Natura bought The Body Shop from L’Oreal. Exclusive discussions with Aurelius began last month, leading to the recent finalization of the business deal.

The announcement was well-received by the market, with JPMorgan analysts, led by Joseph Giordano, expressing a positive outlook for Natura. In their view, the valuation of The Body Shop in the deal is favorable, as “the potential value to be received exceeded their estimated range of $200-300 million.”

This will be the third sale for The Body Shop since original founder Anita Roddick sold it in 2006. The brand, famous for its all-natural products and stance against animal testing, later faced accusations of compromising its ethical principles after being sold to L’Oreal and subsequently Natura.

Aurelius, the new owner, is a global private equity firm with several UK fashion and sportswear investments. CEO Ian Bickley sees this sale as an opportunity to initiate “a new chapter” for The Body Shop, which struggled financially despite store redesigns and service expansions under Natura’s leadership.

Analysts attribute the brand’s decline to competition and a lack of innovation. Although the pandemic saw a brief surge in sales, the recent cost-of-living crisis led to consumers prioritizing affordability over sustainability and ethics.

“The Body Shop’s recent struggle has been driven by consumers trading down to more affordable retailers, casting aside sustainability and ethical claims in favour of value-for-money and lower price points.”

Tash Van Boxel, analyst at GlobalData, via BBC

Besides the purchase price, Natura will receive a £90-million “earn-out” from The Body Shop’s revenues over the next five years.