Exterior shots of Body Shop store in Covent Garden.
L’Oréal has confirmed it is ‘exploring all strategic options’ for The Body Shop

L’Oréal, the French cosmetics behemoth, confirmed in its full-year results on Thursday that it is “exploring all strategic options” for The Body Shop, the British ethical skincare business it acquired just over a decade ago.

The announcement comes after the Financial Times revealed on Wednesday that L’Oréal was working with bankers at Lazard on a review of its options for the struggling UK group, with an outright sale among the most likely outcomes.

L’Oréal said the strategic review of The Body Shop was part of a “brand portfolio optimisation . . . in order to give it the best opportunities and full ability to continue its development”. No decision had been made so far, it added.

After the market closed on Thursday, L’Oréal said like-for-like revenues rose 4.7 per cent year on year in 2016 to €25.8bn. It posted an operating profit of €4.5bn, representing 17.6 per cent of overall sales and roughly 2 per cent higher than 2015.

Jean-Paul Agon, chairman and chief executive of the cosmetics group, said: “L’Oréal achieved another good year, with a significant growth in sales and robust profits.”

In contrast, sales at The Body Shop, which has more than 3,000 stores in 66 countries, have continued to substantially underperform the rest of the group. L’Oréal said on Thursday The Body Shop’s like-for-like revenues rose 0.6 per cent to £920.8m in 2016, but were down 4.8 per cent on a reported basis.

All four of the group’s operational divisions reported growth in 2016, led by its luxe unit, where like-for-like sales were up 6.9 per cent to €7.6bn. In July, L’Oréal added IT Cosmetics to its luxe unit in a $1.2bn deal that was the group’s largest acquisition in eight years.

Revenues across all main regions rose in 2016, led by its “new markets” division — which includes Asia, Latin America, Africa and the Middle East — where like-for-like sales increased 6.3 per cent to €9.8bn.

L’Oréal said its ecommerce revenues jumped 33 per cent last year, though gave no further details. The group has been trying to tap into innovative new companies to harness the power of digital and last month announced that it had selected a handful of “beauty tech” start-ups for its first accelerator programme.

Mr Agon was upbeat about the year ahead. He said: “In an economic context that is still volatile and uncertain, L’Oréal is confident that it will once again outperform the beauty market in 2017 and achieve another year of sales and profit growth.”

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