How The Body Shop does business in Vietnam

The Body Shop Vietnam, operated by InNature Berhad Group (Malaysia), saw its profits decline for three consecutive years and reported its first loss in 2023.

Last week, the nearly 50-year-old cosmetics company The Body Shop filed for bankruptcy for its US branch. The brand’s business in its home country – the UK, Canada and Australia – has also been steadily shrinking.

In response to the above information, The Body Shop Vietnam confirmed that it was not affected. In Vietnam, this cosmetics company is operated by InNature Berhad Group (Malaysia) under the form of a franchise partner, similar to the two markets of Malaysia and Cambodia.

The British cosmetics brand's first store was located in Ho Chi Minh City in 2009. After 15 years, the brand now owns 41 points of sale and is operated by The Body Shop Vietnam Company Limited, 100% owned by InNature Berhad.

Like many other retail brands, The Body Shop Vietnam's business was quite "bright" in the period before the Covid-19 pandemic. At that time, the chain's revenue increased continuously, from more than VND112 billion in 2018 to more than VND162 billion two years later. During this period, the Vietnamese market had a revenue growth rate with an annual compound growth rate of over 20%, stronger than the consolidated results of the owning group - InNature Berhad (-8.8%).

Profits are on the rise, but not consistently. Profit after tax in 2019 reached VND23 billion, up 65%. In 2020, this figure decreased by 14%, but the decline was still slower than the decline of over 39% of InNature Berhad.

Overall, this is a good period of operation for The Body Shop Vietnam, accounting for 20% of InNature Berhad's business results in 2020.

Outside a The Body Shop store in Thu Duc City (HCMC), December 2023. Photo: The Body Shop Vietnam

Since 2021, this chain has been "hit" by Covid-19. While revenue has decreased by 18%, after-tax profit is only one-third compared to 2020. Revenue has declined in parallel with the group, but the rate of profit deficit is more than twice as strong.

The company’s revenue will rise again in 2022, by more than 12%, but will not recover to pre-pandemic levels. In addition, profits will continue to decline.

2023 - The first year The Body Shop Vietnam reported a loss, negative more than 5 billion VND, while revenue was nearly 136 billion. Vietnam is the only market where InNature Berhad operates below cost price, while profits in Malaysia and Cambodia remain positive, although decreasing.

InNature Berhad said its revenue fell more than 9% last year due to challenges in the retail market. Operating costs rose in three countries, causing its profit after tax to fall by nearly 45%.

However, The Body Shop's business results in Vietnam and the two Southeast Asian markets are still brighter than in Europe and the US . Prolonged financial challenges, along with an increasingly competitive retail environment, have caused difficulties for this cosmetics company. Last November, the brand had to change owners for the third time due to profit difficulties, with its valuation falling fourfold compared to 2007, to $260 million. Last month, The Body Shop in the UK announced its insolvency and forced restructuring.

In Vietnam, InNature Berhad said it is still expanding The Body Shop network in the central areas of Ho Chi Minh City and Hanoi. At the same time, the chain will continue to promote its online business, especially through social networks.

In terms of its plans for this year, InNature Berhad’s management believes the company can weather the storm in Southeast Asia, despite continued economic and geopolitical uncertainty. The group said it has received assurances from The Body Shop’s brand manager to support business growth, despite restructuring in the UK.

“We expect to achieve better results this year, although quarterly performance is subject to volatility,” InNature Berhad’s 2023 financial report said.

Siddhartha

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