Profit warning proves costly for Body Shop

Body Shop's warning that profits will fall by up to 15% has led to more than £51 million being wiped off its £234.8 million market value.

Chief executive Patrick Gournay admits that the Christmas period had been a "big disappointment", putting most of the blame on an over-ambitious expansion of new products.

He says that in the rush to introduce new products, the group had placed a priority on speed and efficiency, which had inevitably meant a cost in margin and inventory price.

"We were probably too radical in eliminating too many of our heritage products to give way to our new products. We probably went too far," Mr Gournay says.

Despite saying he "did not want to make too much" of the impact of the weather or the transport disruption in the run-up to Christmas, he adds: "It was a factor".

Mr Gournay insists the Body Shop's US operation is still performing well, despite a softening in retail sales in the run-up to Christmas.

Referring to the group's performance over Christmas, the period in which it usually makes 70% of its profits, he says: "It has been very much a learning experience."

Body Shop's shares took a hammering on the London Stock Exchange as City investors digested the news. By mid-morning its shares were down 22%, or 26.50p at 94.50p.

The firm says its problems were made worse by the strength of the pound in Europe, which cost the group around £3 million in adverse exchange rates.

Worldwide it saw like-for-like sales, excluding income from new stores, ahead 2% on last year. But sales in the UK and Ireland fell by 2% compared with last year.