Boohoo shares continued last week’s downturn this morning, slumping as much as 15.4 per cent as the decision by one of the fast fashion retailer’s biggest shareholders to dump the majority of its stock continued to spook investors.
Standard Life Aberdeen (SLA), the UK’s largest listed asset manager, on Friday sold off shares in the fashion brand worth nearly £80m, following allegations of poor working conditions at a factory in Leicester linked to the firm. SLA was the company’s sixth largest shareholder before the stock sale.
The asset manager slammed Boohoo’s “inadequate” response to a Sunday Times investigation which revealed workers at Leicester’s Jaswal Fashions factory, which makes clothes for Boohoo’s Nasty Gal brand, were paid as little as £3.50 an hour.
“Having spoken to Boohoo’s management team a number of times this week in light of recent concerning allegations, we view their response as inadequate in scope, timeliness and gravity,” said Lesley Duncan, deputy head of UK equities at Aberdeen Standard Investments, SLA’s fund management business.
Boohoo shares fell as little as 209.9p last Thursday before recovering to 280p at market close on Friday. Shares were down 15.4 per cent to 236.5p this morning, before settling slightly to 239p at 2pm.
Boohoo last week said it was “shocked and appalled” by the revelations of working conditions at the Leicester factory, and attempted to distance itself from the supply chain in question.
In a statement, the fashion firm said its supplier Revolution Clothing had instructed another company — Morefray Limited — to fulfil an order for its brand Nasty Gal. Boohoo terminated its relationship with both companies saying they had broken its code of conduct.
Photos released yesterday by the Daily Mail showed Mahmud Kamani, the billionaire co-founder of Boohoo, on a night out with Asheem Sobti, the director of Revolution Clothing in 2017.
The paper reported that the two have socialised together on numerous occasions, including holidaying with one another’s families, and Sobti receiving an award on behalf of Kamani at the 2014 Asian Achievers Awards.
Swiss hedge fund PSquared Asset Management last week launched an attack on shares in Boohoo following the factory allegations, placing bets worth more than £20m against the company’s stock.
Short sellers use borrowing contracts to sell shares and buy them back when the price falls, making a profit on the price difference.
Major retailers Next, Zalando, Amazon and Asos all cut ties with the fast fashion brand last week, wiping £1.5bn from the fast fashion brand’s value in just two days.
It comes as a separate Boohoo warehouse in Sheffield was yesterday branded a “breeding ground” for coronavirus, after 25 workers tested positive for coronavirus and dozens more suffered symptoms.
Workers at the building, which distributes garments for Boohoo’s Pretty Little Thing label, said they were forced to continue working 12-hour shifts throughout lockdown despite social distancing rules.
Sheffield South East MP Clive Betts told the Sunday Times that 50 workers had contacted him to voice concerns about procedures at the warehouse.
One worker reportedly told him: “The warehouse is completely full, people are virtually on top of each other with nothing put in place for social distancing, no PPE whatsoever – it’s a breeding ground for the virus and needs closing down ASAP!”
Home secretary Priti Patel yesterday said she feared “cultural sensitivities” have prevented police from cracking down on illegal sweatshops in the UK’s fast fashion industry amid concerns that they would be accused of racism.
Patel said she is now considering an overhaul to modern slavery laws over concerns that current legislation is “not fit for purpose”.