More on Body Shop
Body Shop results
The second half of the financial year (to February 2005) went much better than the first half for Body shop. LFL sales were up 4% globally and were positive in every region except the Americas where LFL sales were flat. Body Shop at Home continued to be extremely successful. Sales growth has been been driven by Body Shop at Home, expansion and LFL growth in roughly equal amounts - an excellent performance for Body Shop at Home which is still a small part of the overall business.
With LFL sales up 6% so far this year it looks as though Body Shop is continuing its growth despite the consumer spending slowdown, which suggests that growth is sustainable. In the context of the current environment the turnaround is all the more impressive and strongly suggests that Body Shop is getting things right. In particular the multi-channel strategy (shops, mail order, internet and Body shop at Home sales) seems to be working extremely well with the non-shop channels growing rapidly with no evidence (so far) that this is cannibalising sales from the shops.
The PE of 11× (at 187p) next year’s sales looks cheap against the growth, and although the 3% yield is not particularly high for the sector it is reasonable. The main concern is the danger that what has gone wrong before (intense competition from competitors who mimicked the attractive characteristics of Body Shops range well enough to satisfy customers at cheaper prices) could go wrong again and there are certainly others who are targetting the same niche as Body Shop.
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