Market Report: Hopes of healthy figures boost The Body Shop

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The Independent Online

The Body Shop finished 8.75p higher at 209.75p as analysts agreed there is a fair chance that things at the group are quite rosy. The retailer's UK business has been one of the rare bright spots on the high street as a major revamp of its estate has lifted its fortunes.

And even if domestically its sales figures show a retreat, investors are unlikely to be too concerned given the company's significant international business. The UK comprises just 17 per cent of The Body Shop's operating profits.

Meanwhile, last week's move into Russia showed that the retailer is confident about its prospects abroad. It has decided to open eight shops in the former Soviet country. Analysts expect today's results will see The Body Shop boast of strong sales growth in the Far East, Middle East and some of the major European markets. Any drop in pre-tax profits will be because of the costs associated with the acquisition of various franchise operations.

Elsewhere in the sector, there was yet more gloom for investors. Next dropped 51p to 1,302p after JP Morgan warned that the clothes retailer is likely to be suffering as the recovery at Marks & Spencer continues to accelerate.

Going forward, Next's performance looks likely to be further eroded because its rival is planning to cut prices by 10 per cent. The US broker also worries that Next has ignored key autumn/winter fashion trends, which could also weigh on its sales figures. Hence, JP Morgan has lowered its price target to 1,340p from 1,370p, and its full-year earnings forecasts by 3 per cent.

Thorntons lost 6.5p to 165p after the chocolate-shop owner unveiled a 4.8 per cent drop in sales for the first 15 weeks of its financial year. The group did, however, assure the City that takeover discussions with its chairman, Christopher Burnett, continue. His bid vehicle has said it is looking to buy the retailer for 185p a share.

Seymour Pierce does not believe that the poor trading statement from Thorntons has lessened the chances of the bid happening. However, the broker warns that should the offer fail, it expects the stock to drop back to the 125p level.

On a simple risk-reward basis, investors might be tempted to cash in their Thorntons chips. From current levels they stand to make 20p a share if the takeover does come to pass but will lose about 40p a share if it fails.

Back among blue chips, ScottishPower jumped 2.5p to 577.5p after a report in yesterday's The Independent suggested that E.ON may have to pay up to 700p a share to get the support of the ScottishPower board for its bid. WestLB believes the probability of the takeover occurring is more than 50 per cent, and described the mooted price of 700p as "realistic".

GlaxoSmithKline added 15p to 1,445p as Dresdner Kleinwort Wasserstein upgraded its stance on the stock to "add" from "hold" and drew attention to the drug giant's impressive pipeline of 47 products in Phase II trials. It expects many of these to start to deliver from 2006 onwards.

The German broker cautioned that the GSK shares could hit some turbulence in the short term. The stock has risen by 6 per cent over the past month amid hopes of good clinical data before the end of the year. DKW said: "Expectations are running high and the risk for disappointment in the short term is significant".

The corporate raider Vincent Bolloré raised his stake in Aegis, down 1.5p at 137.5p, to 14.7 per cent. Credit Suisse First Boston told its clients to avoid Northern Rock, down 8.5p to 795.5p, Alliance & Leicester, off 10p to 844p, and Egg, 4p weaker at 101.5p. It fears that the trio face earnings downgrades.

Among smaller companies, Chaco Resources rose 0.85p to 6.95p on the back of an ultra bullish drilling update from its operations in Colombia.

Sygen International rose 8p to 54.75p on news the pig breeder had received a takeover approach. Gossips reckon Monsanto, the agri-chemicals giant, might be willing to pay up to 65p a share. TXO ticked 0.25p lower to 14.25p after the sale of 300,000 shares by Mike Chandler, the chief executive of the oil and gas explorer.

CareTech Holdings, a leading provider of learning-disability care services, floated on AIM. After raising £11m through a placing at 160p, the group's shares leapt to 169p by the close, giving it a market capitalisation of more than £60m. CareTech will use the cash to pay down debt and fund its growth programme.

Finally, dealers tipped the construction-services firm Driver to enjoy a strong debut today. It has raised £2m at 73p through the broker WH Ireland.