Body Shop shuts US stores as profits slide

Francesco Guerrera
Thursday 22 October 1998 23:02

BODY SHOP, the "green" toiletries retailer, added another crisis to its troubled history yesterday when it revealed a slump in interim profits and a radical shake-up of its struggling US business.

The news sent the shares in the soap and cosmetics specialist tumbling 9 per cent to an all-time low of 77.5p, as City analysts slashed their year-end forecasts by 16 per cent.

The City was disappointed by a 61 per cent fall in Body Shop's profits to pounds 4.8m, below analysts' expectations. Analysts are forecasting a year- end figure of around pounds 32m, down from pounds 38m previously. Yesterday's figures were hit by falling sales in the UK, Australia and Asia and a pounds 4.2m exceptional charge. The bulk of the extra costs came from the reorganisation of UK and US operations earlier this year, following the decision by Anita Roddick, the group's outspoken founder, to relinquish day-to-day control of the company and become co-chairman with husband Gordon. The Roddicks said that the measures would yield cost savings of at least pounds 2.5m next year.

The company said it would be hit by a further pounds 10m exceptional charge in the second half to pay for the closure of 25 underperforming stores and three warehouses in the US. The shake-up of the US operations comes five months after it was transferred to a joint venture controlled by Adrian Bellamy, one of its non-executive directors.

Body Shop, which operates more than 1,630 shops worldwide, said that the new chief executive, Patrick Gournay, is carrying out a strategic review to resurrect the company's ailing fortunes. Mr Gournay, who was poached from the French food group Danone in July, is looking at ways of streamlining its supply and manufacturing operations. Body Shop is also trialling a new store format, with fewer lines on the shelves but more information to help customers choose products.

The company hopes that the new measures, to be announced in May 1999, will increase its sagging sales.

Worldwide like-for-like sales fell 2 per cent in the first half, dragged down by a 14 per cent plunge in Asia, where economic turmoil curbed demand. The trend continued in the second half, with sales in the first six weeks since the end of the first period down 2 per cent.

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