Results from Body Shop hurt shares

BY NIGEL COPE

Shares in Body Shop, the cosmetics and toiletries retailer, lost 13 per cent of their value yesterday after the company announced disappointing results and a warning of little or no profits growth next year.

However, Anita Roddick's creation plans to maintain its position as a pioneer of unusual ideas when it launches a radio station on the Astra satellite in the autumn.

Body Shop says the station, yet to be named, will cost about £500,000 a year to run and be broadcast from London. It will play 90 per cent music and 10 per cent talk and be available in all stores. "We haven't decided what the 'talk' will be yet," marketing director Jilly Forster said.

The cause of yesterday's profits slide, which saw the share price sag 23.5p to 152.5p, was a poor performance in the US where profits fell from £6.2m to £4.9m in the year. Like-for-like sales fell 3 per cent and are down 8 per cent since the year-end.

The company blamed the hectic pace of expansion in the US for the problems. The battle to find new sites had made the company lose sight of the lack of new products and less efficient service in the US stores, it said. Body Shop opened 65 shops in America last year but will open 40 this year.

Gordon Roddick, chairman, said the US business needed a period of consolidation and focus. Retail and marketing functions would be strengthened. Management has also been firmed up with the appointment of Terry Hartin, who sold his cosmetics business to Body Shop in the UK in 1991, as chief operating officer.

The company said the negative publicity attracted last year by a magazine article disputing Body Shop's environmental claims had had a negligible effect on trading performance. A more important factor was competition from rivals such as Bath & Body Works, the US market leader, which has been competing heavily on price.

Ms Roddick said. "Competition has become a real issue. Retailing is a tough world, but in 1995 we will be surprising a few people."

Body Shop put a mobile shop on the road in America last year in a huge lorry. Shops are being re-designed and an advertising campaign is expected later in the year. Ms Roddick said: "We've just been opening up stores and hoping people would come in. We've got to go out and grab people."

Body Shop will spend between £5m and £36m on new products and store designs this year and will continue its Body Shop direct service, which has 500 consultants.

In the year to February, group pre-tax profits rose 13 per cent to £33.5m on turnover up 12 per cent to £219.7m. Body Shop opened 157 stores during the year, bringing the total to 1,210.

Investment Column, page 34