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Tuesday, January 26, 1999 Published at 09:40 GMT

Business: The Company File

Face lift for Body Shop

The company's message on recycling proved a success in the 1980s

Troubled cosmetics chain, Body Shop International, has announced a radical shake-up of its loss-making operations.

The group plans to create a new management structure and outsource its manufacturing activities, which could have an impact on jobs.

Gillian Lacey-Solymar reports
It also intends to review its unwieldy network of franchised stores and buy-in a number of franchised outlets.

Body Shop's manufacturing operations currently employ around 1,000 people.

[ image: Hemp products have been one of the few highlights in Body Shop's product range]
Hemp products have been one of the few highlights in Body Shop's product range
The radical changes, aimed at reviving flagging sales and profits, are being driven by chief executive Patrick Gournay, who was appointed last May. Mr Gournay replaced Body Shop founder and green business icon Anita Roddick. She is now Body Shop's co-chairman together with her husband Gordon.

Ms Roddick said the changes would not undermine the ethos of the Body Shop. "I think it's right to move on," she said.

She denied that the company would lose control of manufacturing by outsourcing, saying manufacturers would have to match Body Shop's standards and submit to independent social and environmental audits.

Mr Gournay said the moves would increase the group's flexibility and the speed at which products reached the market.

The company expects the changes to save around £8m a year after initial savings of around £4m in the group's next fiscal year.

However, the new measures will involve a further £8m in one-off costs, bringing total one-off charges for the year to £23.5m.

"We believe these changes will significantly enhance our capabilities to improve our operating efficiencies and our product innovation, which has been the consistent hallmark of our success," the group said in a statement.

Review of plants

The shake-up may include the sale of two manufacturing plants at Littlehampton, southern England.

The Littlehampton plants employ 550 staff and there are 576 employed at Body Shop's head office, also in Littlehampton. The soap factory in Scotland, which has 150 staff, is not expected to be affected.

The restructuring will see the firm split into four regions - the Americas, the UK, Europe and Asia.

The group's franchising relationships will also come under scrutiny. Body Shop has already taken control of franchises in France and Germany and owns 75% of its US stores.

In Britain, Body Shop owns 75 of the 265 shops, while in Asia, all shops are franchised, except Singapore. The group has around 1,700 shops worldwide.

Success story

[ image: Anita Roddick charmed consumers with her company's 'green' mission statement]
Anita Roddick charmed consumers with her company's 'green' mission statement
The company was a success story of the 1980s, when it centered its sales pitch on its message of recycling, animal rights and fair trade with the Third World.

However, the company appears to have lost its way. Market watchers expect the Body Shop to deliver profits of just about £25m ($41.48m), well below last year's result of £38m. After disappointing sales during Christmas the Body Shop issued a profit warning.

The company is well aware of the need to change. In its last annual report issued one year ago it "highlighted the need for some fundamental changes in order to develop the business going forward".

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