PARIS/LONDON (Reuters) - French cosmetics giant L'Oreal (OREP.PA) is weighing a possible sale of The Body Shop retail chain, it said on Thursday as it posted higher sales and profits.
L'Oreal said in a statement that it had decided to "explore all strategic options regarding The Body Shop's ownership in order to give it the best opportunities and full ability to continue its development."
It said no final decision had been taken on the British chain, which it bought over a decade ago.
Founded in 1976 by social and environmental activist Anita Roddick, the brand was a pioneer in the ethical beauty business, but has since suffered from heavy competition as many other brands adopted similar philosophies.
"Given the uninspiring performance of the brand, we suspect it shouldn't come as a big surprise," said RBC Capital Markets analysts.
L'Oreal is being advised by Lazard, according to an earlier report in the Financial Times, which said some private equity suitors had already expressed interest in buying the brand and it could fetch 1 billion euros.
L'Oreal said 2016 sales had risen 2.3 percent from a year ago to 25.84 billion euros ($27.6 billion), slightly ahead of the mean average forecast for sales of 25.75 billion euros according to a Reuters consensus conducted with Inquiry Financial.
Earnings per share for 2016 also rose 4.6 percent.
Looking ahead, L'Oreal said that despite "an economic context that is still volatile and uncertain", it was "confident it will once again outperform the beauty market in 2017" with another year of growing sales and profits.
L'Oreal, whose brands include Maybeline New York, Kiehl's and Redken, issued its statement after the Paris stock market had closed with the stock up 0.4 percent after marginal gains so far this year on top of a roughly 12 percent gain in 2016.
L'Oreal has been very active lately in terms of deal-making, announcing the $1.2 billion acquisition of IT Cosmetics last July and the $1.3 billion purchase of three brands from Valeant last month. It said the possible sale of The Body Shop was part of a related "brand portfolio optimisation".
($1 = 0.9379 euros)
Reporting by Sudip Kar-Gupta; Editing by Andrew Callus/Ruth Pitchford