Body Shop International
History of The Body Shop International
In the early to mid 90's, the revenue growth for The Body Shop was at least 20% each year. The Body Shop was able to grow at a fast pace early in the decade because of the lack of competition. Over the course of the decade, competition grew fierce, and, by the end of the decade, revenue growth fell to 8%. Another reason for the slow growth in the late 90's was the over expansion in the previous years. The Body Shop was in almost every mall in America (and on every shopping street in Britain). It is time for The Body Shop to forecast earnings so it will not be blind-sided by another decline in pretax profit.
Because of the lack of revenue growth, Anita Roddick (founder of The Body Shop) was forced to step down from the CEO position. The new management team, assembled by the new CEO Patrick Gournay, was able to increase revenue by 13% in its first year (2001). However, in its attempt to grow the revenue, The Body Shop lost 21% in its pretax profit due to a lack of forecasting through the use of financial modeling.
Financial Forecast for the Years Ended February 28, 2002, 2003, and 2004 (In GBP Millions)
2002 2002 2003 2003 2004 2004 (GBP) (% sales) (GBP) (% sales) (GBP) (% sales)
Income Statement Turnover (SALES) 424.6 100.0% 482.0 100.0% 547.1 100.0%
Cost of sales 167.8 39.5% 190.4 39.5% 216.2 39.5%
Gross profit 256.9 60.5% 291.6 60.5% 331.0 60.5% Operating expenses:
–excluding exceptional costs 215.9 50.8% 245.0 50.8% 278.2 50.8%
–exceptional costs 0.0 0.0% 0.0 0.0% 0.0 0.0%
Restructuring costs 0.0 0.0% 0.0 0.0% 0.0 0.0%
Net interest expense 1.4 0.3% 0.3 0.1% -1.1 -0.2%
Profit before tax 39.6 9.3% 46.3 9.6% 53.9 9.9%
Tax expense 11.9 2.8% 13.9 2.9% 16.2 3.0%
Profit (loss) after tax 27.7 6.5% 32.4 6.7% 37.7 6.9% Ordinary dividends 10.9 2.6% 10.9 2.3% 10.9 2.0%
Profit (loss) retained 16.8 4.0% 21.5 4.5% 26.8 4.9%
In the early to mid 90's, the revenue growth for The Body Shop was at least 20% each year. The Body Shop was able to grow at a fast pace early in the decade because of the lack of competition. Over the course of the decade, competition grew fierce, and, by the end of the decade, revenue growth fell to 8%. Another reason for the slow growth in the late 90's was the over expansion in the previous years. The Body Shop was in almost every mall in America (and on every shopping street in Britain). It is time for The Body Shop to forecast earnings so it will not be blind-sided by another decline in pretax profit.
Because of the lack of revenue growth, Anita Roddick (founder of The Body Shop) was forced to step down from the CEO position. The new management team, assembled by the new CEO Patrick Gournay, was able to increase revenue by 13% in its first year (2001). However, in its attempt to grow the revenue, The Body Shop lost 21% in its pretax profit due to a lack of forecasting through the use of financial modeling.
Financial Forecast for the Years Ended February 28, 2002, 2003, and 2004 (In GBP Millions)
2002 2002 2003 2003 2004 2004 (GBP) (% sales) (GBP) (% sales) (GBP) (% sales)
Income Statement Turnover (SALES) 424.6 100.0% 482.0 100.0% 547.1 100.0%
Cost of sales 167.8 39.5% 190.4 39.5% 216.2 39.5%
Gross profit 256.9 60.5% 291.6 60.5% 331.0 60.5% Operating expenses:
–excluding exceptional costs 215.9 50.8% 245.0 50.8% 278.2 50.8%
–exceptional costs 0.0 0.0% 0.0 0.0% 0.0 0.0%
Restructuring costs 0.0 0.0% 0.0 0.0% 0.0 0.0%
Net interest expense 1.4 0.3% 0.3 0.1% -1.1 -0.2%
Profit before tax 39.6 9.3% 46.3 9.6% 53.9 9.9%
Tax expense 11.9 2.8% 13.9 2.9% 16.2 3.0%
Profit (loss) after tax 27.7 6.5% 32.4 6.7% 37.7 6.9% Ordinary dividends 10.9 2.6% 10.9 2.3% 10.9 2.0%
Profit (loss) retained 16.8 4.0% 21.5 4.5% 26.8 4.9%