Shares rally in Body Shop fightback: Pre-emptive strike against yesterday's publication of journalist's attack reaps stock market reward. Stephen Ward reports

SHARES in The Body Shop rose yesterday despite publication of a much-heralded report by an investigative journalist in the United States questioning the company's green and ethical credentials.

The reaction of investors, who pushed the shares up 8p to 226p in a falling market, suggests a pre- emptive 32-page attack by The Body Shop on the author of the report, Jon Entine, at the weekend had been successful.

At one stage in the past 10 days, the company's shares had fallen by almost 10 per cent on rumours of the article published yesterday in a Minnesota-based magazine, Business Ethics.

The Body Shop said of the report last night: 'It is a mish-mash of defamatory and actionable falsehoods. It contains distortions, shoddy reporting, and the views of several unqualified or biased sources or so-called experts.

'It is now no surprise to us that no one of substance in US or the UK has chosen previously to publish such nonsense. (Mr) Entine's allegations all paint a false picture framed with inaccuracies.'

The Body Shop, founded by Anita and Gordon Roddick, has grown in less than 20 years from one store in Brighton to more than 1,000 shops in 50 countries with a turnover of almost pounds 200m, trading largely on its wholesome image.

Business Ethics, a glossy magazine with a normally sober style circulated to only 14,000 subscribers, prefaced yesterday's publication by saying: 'We bring this story to you with mixed emotions. We have been ardent admirers of Anita Roddick and her company for many years. Two years ago this month we featured her on the cover.

'But after weeks of debate including several conversations with Body Shop representatives, we concluded the greater good would be served by raising these issues in print. We earnestly hope the dialogue that results will be a constructive one.' Alleging that Ms Roddick has wrongly claimed credit for discovering various herbal creams from the Third World herself, the article quotes Janis Raven, a public relations consultant hired by Anita Roddick in 1979, and Mark Constantine, a herbal cosmetics supplier of whom Ms Roddick said in her 1991 autobiography: 'His creative contribution to our product range since then has been immense - his company has grown with us and is The Body Shop's major supplier.'

On various alleged lapses of quality control, not illegal, Mr Entine, an award-winning television journalist, says the company claims all its raw materials are 'microbiologically tested and subjected to our latest analytical techniques', then quotes three Food and Drug Administration inspections in 1992-3, and interviews with four former Body Shop quality control managers, and says former company scientists talk about a number of violations. He says the company would suspend testing when under pressure to boost production. The Body Shop denies these suggestions.

He points out that The Body Shop is similar to a chain of the same name in California which began six years earlier, and quotes some brochures, saying The Body Shop paid dollars 3.5m for the name when it moved into the US. The company says the founders of the Californian shops accept that the similarities are a coincidence.

On the Trade Not Aid programme with the Third World, the article says it is a minute proportion of The Body Shop's business, while the company's image suggests it is much more. The Body Shop says the actual amount is irrelevant, and that what is important is the thousands of people it helps.

The Body Shop is nearly all franchised. The article claims some franchisees complain of wrangles and says The Body Shop paid about pounds 2m to a Norwegian to settle a dispute. It quotes Dean Sagar, an economist on the US House Committee on Small Business, as saying: 'The Body Shop appears to use most of the abusive practices that are standard in the franchising industry.'

But The Body Shop contends that apart from three disputes, which it details, 'the company has never sued a franchisee in 18 years of business'.

'The . . . relationship with the franchisees is healthy and prosperous,' it says. 'The franchises are in great demand world-wide and profitability is positive.'

(Photograph omitted)