Yahoo Finance Boohoo comes out fighting as shares dip amid reports of US ‘slave labour’ ban
ONLINE fashion giant Boohoo today mounted a full-throated defence of its operations and supply chains after its share price slumped following reports it could face a US import ban over labour abuse allegations.
The company told investors it had not been contacted by the US authorities and was not aware of any investigation having been launched.
It said it is confident with actions it is taking to ensure products pass US customs criteria amid a clamp-down on items made using forced labour and will “work with any competent authority to provide assurance that products from its supply chain meet the required standard”.
The Sky News report nevertheless spooked investors, with the share price dropping by some 6% in early trading. It recovered to 330.10p by mid-morning, but was still down 4.2% on the last session’s 344.70p closing price.
It claimed that customs officials in the US - where last year Boohoo's £263million sales were more than a fifth of the company's total revenue - had seen enough evidence to launch an investigation after petitions from British campaigners.
In a statement to the stock market, Boohoo said: “If the group were to discover any suggestion of modern-day slavery it would immediately disclose this to the relevant authorities.”
Today’s report comes after allegations last year some factories in the UK working for Boohoo were paying staff as little as £3.50 an hour.
The group has since appointed Sir Brian Leveson to oversee its attempts to move on from the scandal and in January said it was making “excellent progress” to put in place recommendations of an independent review, having removed 64 companies from its supplier list.
Danni Hewson, a financial analyst at AJ Bell, said: “These new allegations will hurt the reputation of the business still trying to regain its sparkle after an investigation into its UK suppliers left it with a long to do list.
“And it comes at a particularly crucial time. Our lockdown shopping habits helped sales rocket by 40% last year but the company will be concerned that growth might not be sustainable, particularly when you consider how the spending power of 16-25 year olds has been affected by the pandemic. So, it’s looking to broaden its customer base with the £55m acquisition of Debenhams and several of the Arcadia brands.
“It’s also looking to grow its overseas order books and the US is undoubtedly a vital part of Boohoos plans.
“Shares took a tumble this morning, falling more than 7% in early trade. Investors will be keeping a close eye on how quickly boohoo can put this issue to bed once and for all.
“Today’s consumer isn’t just looking for a bargain. They are looking to buy into a lifestyle and social responsibility is part of that.”
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