Shares of British retailer Boohoo slump over ‘sweatshop’ claims

LONDON, United Kingdom – Shares in British clothing group Boohoo plunged further on Wednesday, July 8, as investors turned their backs on the company after accusations of worker exploitation during the coronavirus outbreak.

Shares fell almost 15%, meaning the retailer’s value has fallen more than 40% since the start of the week.

“The turnaround is quite spectacular,” said Russ Mold, an analyst at brokers AJ Bell. “A few weeks ago, everyone saluted Boohoo for having managed to develop during the pandemic.”

Boohoo had been seen as a success story with its ownership of high-profile brands including Pretty Little Thing and Nasty Gal. 

In June, it agreed to buy the online businesses of Oasis and Warehouse.

But its image has taken a battering in the last few weeks following the government’s decision to impose a local lockdown in Leicester because of concerns about a spike in virus cases.

Leicester, in central England, was the first United Kingdom city to face localized restrictions and fingers were pointed at its textile factories, which operated normally at the height of the pandemic.

Labour Behind the Label, which campaigns for the rights of textile workers, claimed that some worked at full capacity throughout the crisis, despite difficulties enforcing social distancing.

The report alleged that textile workers – many of them from minority ethnic groups – were pressured into working, and in one case when a staff member had tested positive for the virus.

It said allegations of abuse about clothing companies in the city’s sweatshops had existed for years, but had been pushed to the fore by coronavirus.

Investigations

The non-governmental organization also asked how the company could continue to forecast a growth figure of 25% for 2020-2021 despite the pandemic.

A Sunday Times newspaper article earlier this month revealed that an undercover reporter worked for two days at a Leicester clothing factory and was promised wages of just £3.50 an hour (3.90 euros, $4.40), well below the minimum wage for an adult over 25 of £8.72 in the UK. 

Boohoo said it was “horrified” and has launched an independent review of its UK supply chain.  

“The market is not convinced, however,” said Mold, who argues that “a review of its supply chain should have been done a long time ago since accusations of bad practices among its suppliers date back to 2017.”

Distributors Next and Asos are among companies which have announced they will not use Boohoo products, at least temporarily, following the accusations. 

“Boohoo is a textbook case of poor ethical practice,” says Michael Hewson, analyst at CMC Markets, adding that their exposure should make people rethink about the ethical nature of “fast fashion.”

The Health and Safety Executive has said it was “actively investigating” 3 textile firms for alleged lapses in workplace safety, and had issued an improvement notice to one company.

The National Crime Agency and the Gangmasters and Labour Abuse Authority this week said they are also probing potential human trafficking and modern slavery abuses, but no offenses had been identified. – Rappler.com