Boohoo reviews suppliers over labour allegations

Andrew Cummings
July 9, 2020

Fast fashion retailer Boohoo (BOO.L) has announced an independent investigation into its supply chain, following allegations of illegal and unsafe working conditions at United Kingdom factories that make its clothes.

It has appointed Alison Levitt QC to look into the supply chain in the United Kingdom and promised to rebuild the battered reputation of clothes makers in Leicester.

The company also pledged to invest an "incremental" £10m ($12.5m) into its supply chain to eradicate malpractice and said it would accelerate a separate third party review into conditions in its supply chain.

The commitments come after a series of allegations about working conditions at factories supplying the company. The factory was also operating at full capacity despite Leicester going into a localised lockdown last week, as the government aims to contain and slow the spread of COVID-19 in the area.

The company said in a statement that the board was "shocked and appalled by the recent allegations" and was committed to working to rebuild the reputation of textile manufacturing in Leicester. Home Secretary Priti Patel promised a crackdown on the Leicester garment industry in the wake of the reports.

In today's short response to the weekend's media reports, Boohoo reiterated its commitment to supporting the United Kingdom manufacturing industry and insisted it will terminate relationships with suppliers that are not acting within the supplier code of conduct.

Today, boohoo said that Jaswal Fashions had never been a supplier and the order at the factory featured in the Sunday Times report was being repackaged for delivery to the group's global distribution centre in Burnley. However, it had uncovered "other evidence of non-compliance".

The fast-fashion retailer told investors on Monday that it will end relationships with any supplier it finds to have broken its code of conduct.

Boohoo's share price has collapsed in recent days.

They've lost about a third of their value since the weekend.

The news came just hours after three leading clothing retailers - Next, Zalando and ASOS - dropped boohoo from their roster of clothes stockists.

Sticking with its "hold" rating on Boohoo's shares, the broker added: 'If there is substance to these stories then there can only be rating contraction risk as knowingly underpaying workers in the United Kingdom, modern slavery and breaking coronavirus crisis rules are most certainly not matters that should or, most probably, would be associated with a premium rated stock, whether on-trend and pure-play or not'.

"All these measures look sensible at first glance, but the genie is already out of the bottle", analysts Greg Lawless and Clive Black wrote in a note.

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