NEW YORK • Remember 1992? A Clinton was campaigning for the White House, Britain was arguing about Europe and The Body Shop could do no wrong, introducing its best-selling "body butter" and opening stores at a fevered clip, driving its London-listed shares to record levels.
Fast forward to 2016 and things look similar for the Clintons and Britain. For The Body Shop? Not so much.
Sales are stalling as a host of new competitors elbow their way into the "green cosmetics" market and The Body Shop's operating margin has narrowed in the last three years, reaching a seven-year low last year.
The chain is the worst-performing business of its owner, L'Oreal, which bought it in 2006 for £652 million. The brand "has been a major disappointment", says Sanford C. Bernstein analyst Andrew Wood. "We do not expect any major change in the foreseeable future."
Mr Jean-Paul Agon, L'Oreal's chief executive officer, has pledged to fix the unit, saying sales growth should accelerate this year. That effort is being led by Mr Jeremy Schwartz, who moved from running L'Oreal's Britain business in 2013.
The third executive to try to transform The Body Shop in the past decade, Mr Schwartz has reoriented the business around skincare, introducing products such as Drops of Youth creams and hiring uniformed consultants to advise customers about products that suit their complexions.
He has added more expensive ranges such as Spa of the World Hawaiian Kukui cream, which costs £23 (S$44) - £9 more than the company's regular body butter.
In February, Mr Schwartz, a marketing veteran of Coca-Cola Co, outlined a 14-point plan through 2020, committing The Body Shop to doubling, to 40, the number of ingredients it sources from small communities, planting trees, patrolling forests and using environment- friendly packaging, including some made from recaptured methane, a key cause of climate change.
"Globally, we see that customers are looking for natural products," says the 53-year-old, who last year visited the Amazon in search of new ingredients such as the Jarana nut, which The Body Shop is currently testing. "Our brand is highly relevant."
The Body Shop burst onto the scene in 1976 as a more natural and ethical alternative to mainstream cosmetics.
Founder Anita Roddick, who died in 2007, pledged not to test products on animals, used natural ingredients such as tea tree oil and burnished the company's green credentials by encouraging customers to return plastic bottles for refills.
These days, it is harder for The Body Shop to stand out. Rivals such as Lush, The Body Deli and Skin & Tonic make similar claims and are benefiting from growing demand for natural-beauty products. Drugstore chains such as Walgreens Boots Alliance also offer their own "green" cosmetic lines.
Though The Body Shop has grown from 2,657 stores in 2011 to about 3,300 in 65 countries, it "has struggled to get its message across in an increasingly crowded marketplace", says Ms Charlotte Libby, an analyst at researcher Mintel. Sales reached €967 million (S$1.5 billion) last year, or 3.8 per cent of L'Oreal's total.
That is an average growth rate of 2.6 per cent a year since 2007, about half the pace of L'Oreal's sales expansion in the period.
Skincare retailer Kiehl's, by contrast, has grown at a double-digit pace since L'Oreal bought it in 2000.
Mr Schwartz's pitch sounds promising - consumers are clearly shifting towards greener cosmetics and the company's skincare sales have been expanding at more than 10 per cent annually since he took over - but then so did his predecessor's.
Talking up sustainable credentials may not be enough to get people buying more, according to Mr Nicholas Micallef, an analyst at Euromonitor International.
Consumers are seeking cosmetics that promise dermatological benefits and The Body Shop is focused more on its environmental message, he says. Buyers "want skincare solutions", he says. "Just having natural products isn't good enough."
BLOOMBERG
