Sterling's fall lets Body Shop raise export prices

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BODY SHOP International, the toiletries group, is planning to exploit the collapse in sterling to raise the prices it charges its overseas franchisees for its lotions and potions, writes Patrick Hosking. The increases should boost profits next year.

Because of the fall in the pound, Body Shop can lift its export prices by up to 15 per cent and its foreign franchisees, who account for 50 per cent of sales, will still pay less for their supplies than 12 months ago.

The group is planning to split the benefit of sterling's 15 per cent fall roughly 50/50 with its franchisees. However, price rises for UK franchisees, due in March, are likely to be much more modest.

Franchisees are billed in sterling. Some have seen a huge fall in their costs in local currency terms. The price rises could add pounds 5m to Body Shop's export revenues without adding to costs.

Negotiations on price increases are under way. Last week more than 100 Canadian franchisees were visiting the UK headquarters near Littlehampton.

The price increases will not benefit Body Shop - which has issued two profits warnings in the past four months - in the current year. Pre-tax profits are expected to be about pounds 21m for the year to 28 February, but are forecast to rise to pounds 25m next year.