Body Shop revamp to follow profit warning

BODY SHOP is expected to announce a radical overhaul of its struggling business next week after another profits warning yesterday pushed shares in the "green" cosmetics retailer close to an all-time low. The warning came as Debenhams, the department store group, also reported a dip in sales, although its shares rose on relief that it had not experienced a Marks & Spencer-style "meltdown".

Body Shop said group like-for-like sales in the 10 weeks to January were 2 per cent down on the same period last year. Sales in the UK and US were 6 per cent and 9 per cent lower respectively. The company said it would make a further announcement next week on the management's plans to "reshape" the company. Analysts believe this could include factory closures in America and significant job losses.

The Christmas trading statement added that although group sales to date are 4 per cent up on last year, the full-year profit outcome will be below market expectations. It blamed a shortfall in Christmas sales in the UK as well as lower wholesale sales to head franchisees as they cut back on stock levels. Analysts have reduced their forecasts from about pounds 32m for the full year to about pounds 25m.

In the UK, Christmas sales were hit by lower sales of seasonal accessories, although Christmas gifts sold well. In the US, Christmas sales were "disappointing" because of an "inadequate" product offering in a highly promotional trading environment. Patrick Gournay, chief executive, said the reorganisation of the US business was continuing, with costs being cut and marketing benefits starting to come through.

The fresh warning pushed Body Shop shares 4p lower to 85p. They stood at around 150p in 1995 when the founders, Anita and Gordon Roddick, hatched plans to take the company private.

They have since attempted to improve their relations with the City, although this has not been reflected in the share price.

Debenhams shares rose by 10.5p to 350.5p on relief that its figures were not as bad as had been feared. In the 20 weeks to 16 January its sales fell by 2.5 per cent on a same-store basis compared with last year, with analysts saying the fall was respectable given the performance of its rivals.

Debenhams said the clothing market had been "difficult" but that sales of Christmas gifts were up by 30 per cent. Designer merchandise and accessories had also done well.

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