OPPapers.com

The Body Shop Scrutinized

INVESTING FOR A INSIGHT BETTER WORLD
Franklin Research’s
A Publication of Franklin Research’s Insight September 15, 1994

This entire issue of Insight has been subsumed by an update on the Body Shop. Since Franklin’s Insight published our brief sell recommendation on the stock in July, vast numbers of words have been printed and broadcast in North America and Europe on the company’s social profile. As we go to press today, much of what Insight has to say will have been said.

Body Shop Scrutinized
Faces Allegations on Social Performance
By Joan Bavaria, Eric Becker and Simon Billenness

Dear Reader...

we independently investigated, we verified some of Entine’s claims. As 1994 progressed, we also became concerned about the growth prospects of the Body Shop’s stock. In early June, Franklin’s Insight lowered its stock recommendation to a “hold,” citing a rise in the stock’s price and expansion plans by a competitor. At an early June Social Investment conference in Toronto, Jon Entine discussed the results of his research on the firm. On June 14, callers to Franklin’s Insight’s weekly hotline heard that Body Shop stock had been further downgraded from a “hold” to a “sell” recommendation. On June 17 and on June 22, Franklin Research & Development Corporation sold all 45,950 of its clients’ shares in the Body Shop. The following July 15 issue of Franklin’s Insight stated: “Last month we lowered Body Shop to a hold based on concerns that its major competitor [Bath & Body Works] was accelerating its growth in the U.S. and Europe. Given this concern and fears that a fairly negative upcoming magazine article may put some near-term price pressure on the stock, we are lowering our rating to a sell.” For a while all was quiet. Then on August 19, Financial Times reporter Andrew Jack wrote about Franklin
Continues on page 2

In the twelve years of publishing this newsletter, the Insight staff has never been as troubled or overtaken by an issue. In the end, we were...