Thursday, February 22, 2024

The Body Shop set to appoint administrators in UK; Biden tells snack companies to stop shrinkflation – business live

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Introduction: The Body Shop is lining up administrators

Good morning and welcome to our rolling coverage of business, the financial markets and the world economy.

Thousands of jobs are at risk at The Body Shop, as the cosmetics retailer’s new owners line up administrators for its British arm.

The Body Shop could go into administration as early as this week, leading to store closures, having suffered disappointing trading over Christmas and in early January.

The retail chain, which has more than 200 shops, was bought by the pan-European private equity investor Aurelius last November.

Administrators at FRP Advisory are likely to be appointed as soon as this week to handle an insolvency process, Sky News reported on Saturday, citing sources who said they expected the closure of a significant number of the stores.

The Body Shop’s international businesses have already been sold to an unknown family office, according to Retail Week.

The Body Shop, known for its ethical trading ethos, dates back almost 50 years, as my colleaue Rob Davies explains:

Roddick, an environmental campaigner, activist and entrepreneur, founded the Body Shop in Brighton in 1976. The company remained under her ownership for three decades, until she sold it in 2006. Roddick died the following year.

By then, The Body Shop had become synonymous with its ethical positions, including a refusal to stock products tested on animals and a sourcing of ingredients from natural products that are traded ethically.

It looks set to be another interesting week ahead for financial markets with a good mix of central bank speakers and data coming into play as the week progresses. Asian trading sessions will experience a drop in liquidity with several markets enjoying the Lunar New Year…

— IC Markets Global (@IC_Markets) February 11, 2024

…before the Bank of England’s Governor Andrew Bailey speaks at the UK’s premier university – Loughborough.

— IC Markets Global (@IC_Markets) February 11, 2024

The agenda

  • 10am GMT: European Commission winter forecasts

  • Noon GMT: India’s industrial production data for December & inflation for January

  • 1pm GMT: Russian balance of trade for December

  • 6pm GMT: Bank of England governor Andrew Bailey gives lecture at Loughborough University

Updated at 

Key events

IMF chief “very confident” world economy will achieve soft landing

The head of the International Monetary Fund has declared she is now “very confident” the world economy will see a soft landing.

IMF managing director Kristalina Georgieva told the World Government Summit in Dubai that:

“We are very confident that the world economy is now poised for this soft landing we have been dreaming for.”

Georgieva also predicted that interest rates would start coming down from the middle of this year in major economies, such as the US:

“I expect to see by mid year interest rates going in the direction inflation has been going on for the last year”.

Georgieva also spoke about the possibilities, and risks of artificial intelligence.

She warned it would be devastating if AI led to more inequality, either within countries or between countries, and added that there’s a risk that AI is used to create a “parallel universe” of lies and misinformation.

Last month, an IMF report predicted that AI will affect 40% of jobs around the world.

Administration is likely to results in “significant” job losses and store closures at The Body Shop, fears Gavin Kramer, senior associate at Collyer Bristow.

“British brick and mortar retailers have been facing formidable challenges for years, and even post-Covid, the fate of well-known chains like Wilko shows that long-standing brands are still vulnerable to changing consumer habits and squeezed household spending.

Given its positive reputation, and the strong demand for ethically sourced consumer products, The Body Shop will hopefully, after entering administration, be able to find a buyer for at least some elements of the business, like its most profitable stores or its online retail business.

Administration is an insolvency process which protects a company from legal action by its creditors while efforts are made to save either the company or, through a sale, the company’s business. However, it’s an unfortunate reality that a business in this situation can seldom avoid significant job losses and store closures.”

Analyst: Administration would be “disappointing development” for one-time trailblazer

If The Body Shop appoints administrators it will prompt fresh concerns about the health of the British high street, says Susannah Streeter, head of money and markets at Hargreaves Lansdown.

Administration will give its owner, Aurelius, the breathing space to restructure and close highly underperforming stores and refocus attention on e-commerce sales – making it likely that some shops will shut for good.

Streeter says:

While the plug will not be pulled on a brand that has lasted almost 50 years, it does still mark a disappointing development for what was a trailblazing venture.

In the 1980s, the Body Shop was the place to go for young shoppers to splash out on fresh scented bubbles and beauty ranges, with a deep environmental conscience and a focus on social justice and conserving nature.

But now stores like Lush hold the bigger pocket money draw for tweens and teens, lured in by fragrant bath bombs and innovative product ingredients. Rivals have stolen a march on what used to be the Body Shop’s unique eco-credentials.

The Body Shop’s sale to L’Oreal in 2006 was the start of a slow decline for the once unique bath and beauty store, Streeter adds:

Anita Roddick was a visionary, offering refills to cut down on plastic decades ago, but that policy was quietly shelved in the 90s to refocus on packaged gift baskets with refill stations only brought back a few years ago. It seems it was too little too late and the Body Shop brand has been struggling to stand out amid a crowded beauty market.

The Body Shop customers reminisce

The news that The Body Shop could soon appoint administrators has prompted a torrent of nostalgia from the company’s customers.

Many have been reminiscing about favourite products such as body butter, bath pearls and white musk perfume.

The Body Shop appointing administrators is so sad. Difficult to convey how revolutionary it was in the ’80s. The Body Shop on Elvet Bridge in Durham was one of my favourite places in the world. Things like fruit soap, lip balms & bath pearls were completely novel. I loved it. pic.twitter.com/gf5SfgmthE

— Luci Gosling (@lucigosling) February 11, 2024

So did I! I have memories of the Cambridge shop in the 80s – Dewberry scent, banana shampoo & conditioner & my dear late Mum used the Vitamin E moisturizer forever! My daughter’s favourite: pink grapefruit body butter & my son was an Activist fan. Body Shop, you will be missed!💚

— Anna M Wolkowski 🇺🇦 (@annawolkowski) February 11, 2024

This is so sad. I’ve been a dedicated Body Shop customer for 40 years. Values led and great products. Their banana shampoo is the best for curly hair and as for the body butter ….! https://t.co/qi8druVrBE

— Sarah Dickins (@Sarah_Dickins) February 11, 2024

If The Body Shop started selling Dewberry, Fuzzy Peach, Ananya and White Musk perfume oils again, then all the nostalgic women in their 40s/50s who would buy them could basically save the entire business.

— Amanda (@Pandamoanimum) February 11, 2024

Ice blue shampoo, the best shampoo there was. Prob with body shop is the price now. Was a user of body butter for years, but now pushing 20 quid – I can’t justify that.

— Funny Face (@0hFunnyFace) February 12, 2024

Loved Japanese washing grains, they were amazing! I wish I could find them now. Lots of fuzzy peach and dewberry worn by me and friends and those bath pearls, oh my daughter would love the “my day” body shop.

— mrs_jones_77 (@mrsvickyjones77) February 12, 2024

The Body Shop: What the media say

It is highly unlikely that the Body Shop brand will completely disappear from Britain’s High Streets, reports the BBC.

They add:

But there will be a focus on reducing its costs, including on property and rents, as well as building up its online presence.

There are hopes it will be restructured to better compete with brands such as Lush, perhaps best-known for its bath bombs, which is popular with younger shoppers.

The Telegraph says The Body Shop’s trading in the UK was not as good as its new owners, Aurelius, had expected when they bought the retailer last November, adding:

The company’s most recent accounts show that The Body Shop posted a loss of £60m in its last financial year, which came while the business was still owned by the Brazilian cosmetics group Natura & Co.

The retailer said that it had been hit by a “challenging retail environment”, along with rising inflation and interest rates.

The Times says Aurelius hoped it could reverse the beauty retailer’s fortunes, however…

Retail sources said that after the deal had been completed at the start of this year, the new owner concluded that the company had insufficient working capital and was trading more weakly than it had anticipated. This week it emerged that Aurelius had sold parts of the beauty retailer’s Europe and Asia business.

The administration process for Body Shop’s UK operations will not affect the brand’s global franchise partners, according to the report.

Over in Germany, the slump in office property has accelerated, with prices sliding 13% in the last quarter.

Bloomberg has the details:

Germany’s market for office buildings suffered its sharpest drop in two decades as higher financing costs and sluggish return-to-office trends soured investor appetite.

The downturn accelerated in the fourth quarter with a 13% drop from the previous year, according to data published Monday by German banking association VDP. For the full year, prices slumped more than 10%, the most since records began in 2003, and the outlook is for further declines at the start of 2024.

UK pay rises set to fall for first time since pandemic

UK workers have been warned to expect less generous salary settlements this year, as employers rein in hiring plans.

The latest Labour Market Outlook from the Chartered Institute of Personnel and Development found that UK employers expect to raise basic pay by 4% in the year ahead, down from 5% expected for the last year.

That is the first fall in pay expectations since the start of the pandemic.

Jon Boys, senior labour market economist for the CIPD, says:

“We’ve seen a sustained period of high wage growth in response to a tight labour market, and high inflation pushing up the cost-of-living. Pay growth has helped individuals but it leaves employers with a higher wage bill to cover.

Heathrow slams ‘tourist tax’ as passenger numbers grow

Heathrow has managed to grow its passenger numbers close to pre-pandemic levels last month.

The UK’s largest airport reported this morning that it was used by 5.996m passengers last month, a 9.4% increase on last year, and not far below the 6.1m in January 2020.

The weight of cargo handled by the airport rose 20% year-on-year, to 122,000 tonnes.

Heathrow is also adding its weight to the campaign to reinstate tax free shopping for international tourists, something which then-chancellor Rishi Sunak abolished in 2020.

The airport says:

While exports are thriving, Britain has shut the door on home grown growth, turning away international shoppers through the tourist tax and tarnishing the UK’s reputation as a competitive country to spend and do business with.

Heathrow has joined forces with the British Chambers of Commerce and the Federation of Small Businesses to make the case for an internationally competitive tax-free shopping incentive at the Spring Budget.

The Office for Budget Responsibility (OBR) is conducting a review of the axeing of tax-free shopping for tourists, which could potentially lead to the decision being reversed.

Victoria Scholar, head of investment at interactive investor, says:

Heathrow has been enjoying strong passenger travel demand with January’s figures just shy of pre-covid levels, pointing to a significant recovery from the pandemic era doldrums. It also enjoyed a strong month in terms of cargo passing through the airport.

While cost-of-living pressures continue to hurt consumers amid the backdrop of elevated prices and higher interest rates, it looks like individuals and families continue to prioritize travel over other luxuries where possible, even in the face of higher air fares. February will be the next major test for Heathrow as a gauge of demand over the typically busy half term period following the seasonal post-Christmas lull.

Meanwhile Heathrow may enjoy a boost to airport spending if the Treasury U-turns on the axing of tax-free shopping for tourists. This has resulted in billions of pounds of lost sales and tax revenues for the UK economy and the public purse respectively so a reversal would no doubt be a welcome reprieve for the travel, luxury, and hospitality industries.”

Families need help saving more for rainy days

The cost of living squeeze has made it harder for retailers such as The Body Shop to grow sales.

And new research today shows that one-in-three working age families have not managed to build up a basic “rainy day” savings of at least £1,000.

This highlights how the poorest households are struggling to build up financial resilience amid the cost of living crisis.

The Resolution Foundation said people across Britain faced a “triple savings challenge” of insufficient savings, an inability to cope financially with major life events such as family breakdown, and inadequate retirement incomes.

It said 11.2 million people lived in households that had savings of less than £1,000, accounting for about one in three working-age households. As many as half lived in the poorest third of households in Britain.

More here:

The Body Shop has been hit by strong competition, and a lack of innovation, says Diane Wehrle, CEO of Rendle Intelligence and Insights:

“News of The Body Shop calling in administrators is a serious blow to UK high streets and retail destinations who will be nervous of how the 200 store portfolio could be rescued to avoid closures and job losses in local communities.

Against a backdrop of the strong performance of the health and beauty sector over Q4 2023, it undoubtedly reflects a lack of innovation and far stronger competition than ever before with many health and beauty brands moving into the natural and socially conscious space which was once owned by Body Shop.

It’s likely that the focus moving forward will be geared much more to online which will be better suited to what is now clearly a disparate customer base.”

Administration might allow The Body Shop to extract itself from markets where it is struggling.

David Boynton, the former chief executive of The Body Shop, told Radio 5’s Wake Up To Money this morning that The Body Shop is a “big and complex international business”, operating in over 80 markets.

Some are very successful and profitable, but others are less so, and in recent years the company didn’t have the money to either improve its loss-making markets or quit them.

Boynton explains:

The fact is it’s very expensive to close markets, because of lease obligations and redundency costs, especially in countries like Germany and France.

There are people speculating that the potential administation might be a means of removing some of the obligations in closing less profitable markets.

Joe Biden tells snack companies to stop shrinkflation

President Joe Biden has launched an attack on food and drink companies who are cutting the size of their products but not the cost.

In a video posted ahead of last night’s nail-biting Super Bowl LVIII, Biden pointed out that sports drinks bottles are smaller, while you get fewer crisps in a packet than you used to, and less ice-cream in a carton too.

As Biden puts it:

I’ve had enough of what they call shrinkflation. It’s a rip-off.

“Some companies are trying to pull a fast one by shrinking the products little by little and hoping you won’t notice.

“Give me a break. The American public is tired of being played for suckers. I’m calling on companies to put a stop to this. Let’s make sure businesses do the right thing now.”

While you were Super Bowl shopping, did you notice smaller-than-usual products where the price stays the same?

Folks are calling it Shrinkflation and it means companies are giving you less for every dollar you spend.

I’m calling on the big consumer brands to put a stop to it. pic.twitter.com/wL1NsEh78F

— President Biden (@POTUS) February 11, 2024

Shrinkflation has helped consumer goods makers to grow profits despite inflationary pressures, and it isn’t only a US phenomenon.

Retailers in the UK have been cutting the size of their products for several years, and also changing their ingredients, as they try to absorb the impact of higher raw material, energy and staff costs….

…while in France, supermarket chain Carrefour has put labels on its shelves this week warning shoppers of “shrinkflation”, to shame retailers who have been cutting product sizes.

Biden also seems happy with the result from Las Vegas:

With their third Super Bowl win in just five seasons, the Kansas City Chiefs aren’t just champions today – they’re a dynasty.

Congratulations, Chiefs Kingdom.

Ready to welcome this team back to the White House. pic.twitter.com/8GZDRiopRX

— President Biden (@POTUS) February 12, 2024

Updated at 

Introduction: The Body Shop is lining up administrators

Good morning and welcome to our rolling coverage of business, the financial markets and the world economy.

Thousands of jobs are at risk at The Body Shop, as the cosmetics retailer’s new owners line up administrators for its British arm.

The Body Shop could go into administration as early as this week, leading to store closures, having suffered disappointing trading over Christmas and in early January.

The retail chain, which has more than 200 shops, was bought by the pan-European private equity investor Aurelius last November.

Administrators at FRP Advisory are likely to be appointed as soon as this week to handle an insolvency process, Sky News reported on Saturday, citing sources who said they expected the closure of a significant number of the stores.

The Body Shop’s international businesses have already been sold to an unknown family office, according to Retail Week.

The Body Shop, known for its ethical trading ethos, dates back almost 50 years, as my colleaue Rob Davies explains:

Roddick, an environmental campaigner, activist and entrepreneur, founded the Body Shop in Brighton in 1976. The company remained under her ownership for three decades, until she sold it in 2006. Roddick died the following year.

By then, The Body Shop had become synonymous with its ethical positions, including a refusal to stock products tested on animals and a sourcing of ingredients from natural products that are traded ethically.

It looks set to be another interesting week ahead for financial markets with a good mix of central bank speakers and data coming into play as the week progresses. Asian trading sessions will experience a drop in liquidity with several markets enjoying the Lunar New Year…

— IC Markets Global (@IC_Markets) February 11, 2024

…before the Bank of England’s Governor Andrew Bailey speaks at the UK’s premier university – Loughborough.

— IC Markets Global (@IC_Markets) February 11, 2024

The agenda

  • 10am GMT: European Commission winter forecasts

  • Noon GMT: India’s industrial production data for December & inflation for January

  • 1pm GMT: Russian balance of trade for December

  • 6pm GMT: Bank of England governor Andrew Bailey gives lecture at Loughborough University

Updated at 

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