The online retailer has launched a £10 million independent investigation after allegations of malpractice.
Boohoo launches independent review of its UK supply chain
- Boohoo has launched an independent review of its supply chain following exploitation claims.
- The brand has been dropped by other retailers such as ASOS, Next and Zalando .
- The shares fell back 9% having already dropped back sharply in recent days.
- Recommendation: We maintain our ‘Buy’ recommendation for investors willing to accept a medium to high level of risk, but would suggest drip feeding into the stock given the volatility.
Online fashion retailer Boohoo announced today that it was launching an independent review of its UK supply chain, led by a QC, and was investing £10 million to eradicate malpractice. The company said it was shocked and appalled by allegations in a recent newspaper report and would not hesitate to terminate relationships with any suppliers who did not follow its code of conduct. Boohoo said that its initial investigations had found some inaccuracies in the reports, such as that the alleged supplier has never actually been a supplier to Boohoo and there is no evidence that any of its suppliers paid workers £3.50 an hour. However, it did find other breaches of its code of conduct and has terminated two supplier relationships.
The shares fell back 9% on the announcement, having already dropped back sharply in recent days. Clearly this is a difficult moment for Boohoo and the reports that several other retailers have temporarily removed Boohoo’s products from their websites adds to the pressure. Boohoo’s management is clearly taking the issue very seriously and is swiftly taking action to address the concerns. It is positive to hear that some of the main allegations have already been addressed and appear to be unfounded, but the company needs the independent review to report back quickly so that the full facts are known. It is still too early to tell if this will have an impact on sales at Boohoo, which has been one of the best performing retailers in the UK in recent years. Only three weeks ago it reported first quarter revenue growth of 45%. We maintain our Buy recommendation for investors willing to accept a medium to high level of risk, but would suggest drip feeding into the stock given the volatility.
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