US sales slump hits Body Shop profits

The problems at Body Shop, the toiletries group, deepened yesterday when the company announced a 26 per cent decline in profits caused by continuing problems at the group's American operations.

The US division slumped into a pounds 2.4m loss in the six months to August compared with a pounds 1.5m profit last time. The company blamed higher operating overheads together with a poor performance in the stores the company operates itself, rather than those it franchises out.

Body Shop plans to spend $2m on an advertising campaign in the US in an attempt to raise consumer awareness of the brand, which is under pressure from rival chains. The campaign will focus on New York, Washington, Chicago and Los Angeles, and will not go national unless it produces an improved performance in the stores. "The US is a difficult market and it is necessary to raise the profile of the Body Shop name," the company said.

The US has proved a hard slog but it is now the company's largest market with 262 stores. It opened a further 27 in the last six months with a further 13 openings planned by the end of the year. US sales were 16 per cent higher at pounds 44m but like-for-like sales fell 8 per cent. The company said that the rate of sales decline had fallen to 2 per cent since the end of August.

Group profits fell 26 per cent to pounds 12.3m on sales up 15 per cent at pounds 238m. Full-year profits are not expected to exceed last year's pounds 33.5m and some analysts believe it will struggle to meet this target. The UK stores are doing little better with profits down pounds 1.4m to pounds 2.9m due to higher costs. However, like-for-like sales improved 2 per cent.The shares fell 6p to 135p.

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