The Body Shop International PLC 2001

The Body Shop International PLC 2001 - The Body Shop...

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The Body Shop International PLC 2001: An Introduction to Financial Modeling Chris Combs, Katie Condon, Kelley Kirkley 1. At the turn of the century the Body Shop International PLC was close to folding; the once profitable firm boasted a 20 percent revenue growth, however by the late 1990’s it had dropped to around 8 percent. The firm began spending money trying to revamp the company. In 2001 the firm spent $2.4 million on supply chain development and another $4.5 million closing unprofitable shops and analyzing other locations in the U.S. Shops were sold in Britain and restructuring costs began to pile up. Our forecast was derived on the assumption that as new CEO Gournay stepped in and began restructuring and re-defining The Body Shop International, the company was slowly growing back to its once financially healthy self. Sales were slowly increasing, however cash was tied up in restructuring the firm. The financial statements seemed to tell a “comeback” story as cash stopped decreasing and sales continued to soar. Trying to rebuild relationships with suppliers The Body Shop International wanted to rejuvenate its brand name not only with its customers but also its suppliers, allowed them to stretch their line of credit, in essence increasing the company’s accounts receivable. By late 2002 early 2003 the firm had completed restructuring: closing unprofitable plants and reviewing all others; therefore the cost had been entirely eliminated. The “base case” assumptions that we chose when deriving our pro forma financial statements were of critical importance. Cost of goods sold was the first base case assumption we chose, because of its direct correlation with sales and its impact on profit. The company to be as profitable as it can and function at an optimal level it is key to understand what percentage of sales the cost of goods should be. Operating
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