Body Shop share price dives 108p

ANITA and Gordon Roddick saw pounds 56m wiped from their personal fortune yesterday after warning that their Body Shop International group of franchised cosmetics shops would not meet profits expectations this autumn.

The Body Shop share price plunged 108p to 158p, slashing the total market value of the group from pounds 494m to pounds 293m as it announced that the summer takings in its UK shops had been disappointing.

Body Shop said its profits for the six months to 31 August would be not less than pounds 8m, which was lower than market expectations. Last time it made pounds 9.1m. But the group said it aimed to maintain the interim dividend at 0.68p.

The Roddicks, who own 28 per cent of the shares, immediately launched a spirited defence of the business, which in 16 years has grown to more than 750 stores worldwide thanks to its innovative blend of affordable lotions and potions and unusual emphasis on environmental and other issues.

Body Shop was not another 1980s high-flyer brought down to earth, said Mr Roddick, chairman.

'Those people who think it is all going horribly wrong for Body Shop are going to be equally horribly surprised,' he added. 'We are not a Ratners.'

The City had over-reacted: 'I think they have all had a brain haemorrhage. I think it is a histrionic reaction. Look at the strength of our overall business and our overseas trade.'

But analysts were more circumspect. Andy Hughes, of Nomura, reduced his forecast for pre-tax profits in the year to February 1993 from pounds 31.5m to pounds 23.5m, a decline on the pounds 25.2m Body Shop achieved in 1992.

County NatWest, Body Shop's own broker, now predicts profits will be flat this year. The analyst John Richards said: 'I think the prospects are still good and a hell of a lot better than for some other retailers.'

Mr Roddick said: 'UK trading in June, July and August was off budget by a few per cent. We're talking under 5 per cent. That obviously has a degree of impact.'

The closure of six shops because of a dispute with a franchisee had also temporarily reduced sales. These would reopen in the next few weeks.

The sluggish sales were a combination of fewer people entering the stores and the average transaction size slipping slightly. No product category had suddenly fallen out of favour, he said.

On the share price collapse, he said: 'I think it is a combination of panic, of general all-round bad retailing news and a lack of grasp of our overall business.'

Questioned about the level of Body Shop debt, which is thought to have risen, he said: 'There isn't anything unusual in there, I can assure you.' But he refused to give a borrowings figure, saying it was in the close period.

He stressed that the overseas operations, which account for 40 per cent of sales, remained healthy, adding: 'Sales in the rest of the world have continued to grow strongly and international trading profits have increased substantially.

'International expansion will continue to reduce the impact of the unpredictable UK economy.'

Even before yesterday's announcement the shares have taken a pasting this year, falling from a peak of 370p. There were brief jitters in May when the Channel 4 Dispatches programme questioned its environmental record.

Body Shop has been a glamour stock for many years, sometimes trading on a rating as high as 70 times prospective earnings. After yesterday's markdown the shares are priced at an unexceptional 17- 18 times forecast earnings.

Body Shop said 60 stores would open overseas in its second half on top of 73 that opened in the first half to August.

In its last full year to 29 February it lifted pre-tax profits by 26 per cent to pounds 25.2m - in line with City expectations. The keenly awaited interim figures are due in mid-October.

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