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Firm appoints QC

Boohoo launches review into malpractices claims

Boohoo

The company buys products made mainly in the UK

Fast fashion retailer Boohoo said it was “shocked and appalled” by the recent allegations over cheap labour at one of its suppliers and has launched a review led by Alison Levitt QC.

It will form part of its response to rebuilding the reputation of the textile manufacturing industry in Leicester.

The company is backing the review with a £10m investment “to eradicate supply chain malpractice” and will work with the Home Secretary and the local authority on any investigations.

It said there were some inaccuracies in last Sunday’s media report. The garments featured were not actually manufactured in Leicester, but in Morocco.

Post production, the garments were shipped back to the UK by the supplier to be repackaged into compliant boxes for delivery to the Group’s international distribution centre in Burnley. This was the process that was filmed at a premises formerly operated by Jaswal Fashions.

Jaswal Fashions, contrary to the media report, is not and has never been a supplier for the group, and does not operate in the unit stated.

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“Our investigation to date has not found evidence of suppliers paying workers £3.50 per hour. However, we have found other evidence of non-compliance with our Code of Conduct and the Group has taken the decision to immediately terminate its relationship with both suppliers.”

Boohoo said it supports UK manufacturing and the British fashion industry and 40% of the products it sells are manufactured in the UK, supporting thousands of jobs in this country that may otherwise be lost to overseas markets.

“Producing garments in the UK does not bring a cost advantage for the Group. We produce garments in the UK because of its proximity to our international distribution centres.”

Next and Asos last night announced they have dropped Boohoo clothing from their websites.

Boohoo’s shares fell 15% and are down by a third since the weekend, which has seen more than £1 billion from the company’s value.

Other online retailers, including Zalando and Very.co.uk, have also temporarily suspended the sale of Boohoo items.

Market reaction

The tide is turning for Boohoo, says Russ Mould, investment director at AJ Bell, as environmental, social and governance (ESG) issues come to the fore and seem to be more powerful factors than the corrective action.

“Despite pulling out all the stops, its crisis management efforts aren’t stemming the growing backlash against the company,” he said.

“The change in stance towards the retailer is quite remarkable.

“Only a few weeks ago everyone was applauding Boohoo for its ability to continue growing during the pandemic and investors were bidding up its share price to new record highs.

A clear statement from the company in response to allegations of modern slavery shows it is taking the matter very seriously. Unfortunately, the market doesn’t buy it

– Russ Mould, AJ Bell

“Now in the space of days the share price is falling fast, and a growing army of people are sharpening their knives.

“A clear statement from the company in response to allegations of modern slavery shows it is taking the matter very seriously. Unfortunately, the market doesn’t buy it.

“Undertaking a thorough review of its supply chain should have been done a long time ago as allegations about poor supplier working practices date back to 2017.

“Saying it will also look for two non-executive directors with skills in handling ESG issues also suggests it is reacting a little too late.

“Boohoo looks like a classic case study in the making for poor ESG practices given the supplier and wage controversy, its actions in buying companies from connected parties and the very large incentive plans for directors.

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“It’s also worth considering that the nature of the fast fashion model and low-price tag mean that many of its customers are buying clothes, wearing them once and chucking them, which is hardly ethical.

“Social media can help build a brand very quickly as influencers show off a company’s products. However, the reverse is also true.

“A social media backlash is now building against Boohoo as the likes of Next and ASOS temporarily stop selling its clothes and reality TV star Vas J Morgan becomes the first influencer and former Boohoo collaborator to boycott the brand.”



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