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Cosmetics maker Natura &Co Holding SA is considering the sale of its Body Shop unit as it seeks to cut costs, the latest step in a reversal of a major global expansion strategy. Shares in the Sao Paulo-based company were up 2.3%, following its board’s approval to explore strategic alternatives for The Body Shop, including a potential sale. It acquired the British retailer from L’Oreal SA about six years ago.
The move adds to a shift for Natura, which has been returning focus to its core Latin America business after grappling with disruptions brought on by the pandemic and cost-inflation pain amid Russia’s war in Ukraine. The company sold its luxury cosmetics brand Aesop to L’Oréal this year.
A sale of The Body Shop could reduce “corporate structure complexities and costs,” while helping Natura allocate capital “to its core strengths,” Bradesco BBI analyst Felipe Cassimiro wrote in a report in July.
Natura rose through the ranks to become one of Brazil’s most popular retailers through its direct-selling model, and more recently has concentrated on the integration of Avon Products Inc, which it acquired about four years ago. The Aesop sale helped eased concerns over its leverage metrics.
A Body Shop divestiture “appears to be the most likely scenario,” JPMorgan Chase & Co analysts led by Joseph Giordano wrote. The sale “could trigger potential extraordinary dividends, particularly in the context that the company should sit in a net cash position post the Aesop sale.”
The stock rise adds to a 35% rally this year, compared to a 6% gain for Brazil’s benchmark Ibovespa index. Natura’s dollar notes due in 2028 were little changed at near 89 cents on the dollar, according to Trace data.