Body Shop Finances

In January 1986 The Body Shop company went to the London Stock Exchange Market. From that day on the organization had to act differently. With a capital injection the company could turn from being a niche retailer to an international corporation .

The Body Shop has been listed on the London Stock Exchange for 20 years and finally it was taken over by a cosmetic giant from France, L’Oreal, in March 2006. It is said that, despite this huge change in ownership, “Anita Roddick’s baby” will “retain its existing identity and values and operate independently within the L’Orйal group, led by the current management team. ” Time will show the truth.

This performance measurement analysis will concentrate on years 2001 – 2006 as this seems to be a reasonable time range.

Firstly, table no. 1 shows basic indicators of performance. Operating profit has been rising each year. This trend has become stronger between year 2003 and 2005 with a downfall to just 6% increase in 2006 (£41.5 millions). Turnover was fluctuating around the same level till year 2004 (~ £380 millions) and turned into an upward trend that is becoming faster. A very similar situation is presented by the retail sales value, which in 2006 reached a level of £772 millions. The net debt, which is short and long term debt minus cash & cash equivalents, was reduced significantly till year 2004, when an implementation of new £100-million-investment-plan started.

Such sequence of changes in first three indicators was caused by several factors. In year 2002 results were expected to be better, but the tragedy of the 11th of September influenced American market severely. Asia and Pacific as well had problems in the second half of the year as the economy was deteriorating. What’s more stores overheads were higher due to rental costs and in addition to that the company faced exceptional costs (£11.5 millions) such as property or redundancy costs. The Body Shop was concentrated at that time on starting new products and opening new shops (124).

The aim was changed in the following year, when the management wanted to drive sales in the existing shops rather that opening new ones (just 14 this time). Inventory system was improved, net debt was reduced, £85-million-investment in a new facility was started