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Body Shop
The UK has been Body Shop’s weakest region for some time and this continued into the first half of the 200/5 financial year withLFL sales down 5%., but there are signs of a turnaround with the decline down to 1% over Christmas. The main driver of turnover growth has been Body Shop at Home which increased sales 51% to £21.5m: £7.3m of the company’s £8.8m total turnover growth.
The weakest market geographically is The UK and Ireland, which is barely profitable, generating 4.7% of operating profit on 33% of turnover. Turning round the UK business is crucial, there are signs it is happening with the second quarter LFL sales fall (3% against the previous year) much better than the first quarter (7%) and trading over Christmas better still (down 1%). In addition Body Shop at Home continues to grow rapidly despite the Uk operation being the most mature of the Body Shop at Home businesses.
Sales growth in the Asia Pacific (+20% in the first half) is encouraging but it is not driving profits (operating profit +2%) movements. The long term outlook in the region is good. Growth of Body Shop at home was strong (+27% to 3.8m) but it is still (and is likely to remain) restricted to only some countries in the region.
The Europe Middle East and Africa region was mixed and performance close to flat with LFL sales down 1%, but operating profit up on a better sales mix.. An apparent recovery in the US historically weak US operation may be faltering with LFL sales flat over Christmas.
Body Shop is trading in line with the sector with a prospective PE of 13× consensus forecast at the current price of 159p. The company has some interesting growth drivers, Body Shop at Home in particular, and a strong brand (probably stronger outside the UK than within it). It does, however need to turn around the UK business.
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