By Lina Saigol
Shares in Boohoo slumped by more than 16% on Wednesday amid continued backlash against the fashion company over allegations of poor conditions for workers and little protection from COVID-19, and as Amazon.com became the latest online retailer to remove the company’s products from its site.
The online fashion company said on Wednesday that it will launch an immediate independent review of its U.K. supply chain, following allegations that some garment factories in Leicester paid workers below the minimum wage and failed to protect them from coronavirus.
Boohoo /zigman2/quotes/205655689/delayed UK:BOO +1.73% , which owns brands including Pretty Little Thing and Nasty Gal, said the review will be led by top lawyer Alison Levitt QC. It said it would make an initial commitment to invest an incremental £10 million to “eradicate supply chain malpractice.”
“We take extremely seriously all allegations of malpractice, poor working conditions, and underpayment of workers,” Boohoo said in a statement .
Shares in Boohoo still fell as much as 16.24% in early European trading on Wednesday, having lost a third of their value this week following the report in the Sunday Times newspaper that alleged that workers in a factory in Leicester, England, which sells clothes for Boohoo were being paid as little as £3.50 an hour. The minimum wage for those aged 25 and over in the U.K. is £8.72 .
Several online retailers have since dropped the sale of Boohoo products from their websites.
On Wednesday, Amazon /zigman2/quotes/207159039/delayed XE:AMZ -3.03% said it would remove Boohoo’s products while the company conducted its investigation. “Selling partners are required to follow all applicable laws, regulations, and Amazon policies when selling in our store. We will be suspending the sale of the brands in question,” a spokesperson told MarketWatch in an emailed statement.
Amazon holds stock from Boohoo and its associated brands as a result of historic agreements.
The U.K. government extended the lockdown in Leicester last week after a sudden rise in the number of coronavirus crisis. On Tuesday, the health secretary, Matt Hancock, said the city’s number of new infections a day has reduced from 135 to 117 per 100,000 people.
Boohoo said its investigation to date hasn’t found evidence of suppliers paying workers £3.50 per hour. “However we have found other evidence of noncompliance with our code of conduct and the group has taken the decision to immediately terminate its relationship with both suppliers.”
Next /zigman2/quotes/200704121/delayed UK:NXT 0.00% was the first major fashion retailer to take action, removing all Boohoo and Pretty Little Thing items that it was previously selling from all of its websites last week. “Next looks forward to seeing the results of the investigation Boohoo has announced. In the meantime Next does not intend to resume selling Boohoo labels until the investigation is complete and any necessary remedial action has been taken,” the company said.
Berlin-based online fashion store Zalando /zigman2/quotes/209028521/delayed DE:ZAL -2.89% said it has made the decision to delist all products by Boohoo Group and subsidiaries and pause all new business with Boohoo effective July 7. A spokesperson for Zalando said it had made assessments around ethical and sustainable parameters for its brand partners mandatory.
“Only once all corrective actions have been satisfactorily addressed by Boohoo, can a conversation be revisited to discuss the commercial relationship between Zalando and the Boohoo group moving forward,” the spokesperson told MarketWatch in an emailed statement.
ASOS /zigman2/quotes/209092221/delayed UK:ASC +2.00% said it has also temporarily suspended its trading relationship with all Boohoo brands until Boohoo has completed its investigation and it has received necessary assurances regarding supply-chain practices.
“The decision by stockists, ASOS, Zalando and Next to pull the Boohoo brands’ products from their websites is a bold move, but the right one to send a clear message to consumers that they do not endorse such practices. As these retailers stock hundreds of brands, they do not stand to lose much from this, whereas Boohoo has lost its main wholesale partners, impacting its sales,” said Emily Salter, retail analyst at GlobalData.
Analysts at Citi said Boohoo, which sells its products through a variety of third-party sites, has “struck the balance between speed of investigation and guaranteed independence of investigation and reiterated the importance of this issue to the group.”
“The third-party aggregators are only a small part of the revenue mix but we think this will reassure them sufficiently to restock the Boohoo product. On this basis we think management has reacted quickly to these issues and the share price should start to recover,” the Citi analysts wrote in a research note on Wednesday.
Boohoo said that it has retained compliance specialists Verisio and Bureau Veritas to accelerate its independent third-party supply chain review, which is already under way with Verisio.
While there is no evidence that these Leicester workers have been contributing to the spread of COVID-19, the pandemic has hit immigrant workers hard in several countries where living conditions increase the risk of contagion and the possible loss of employment and health insurance coverage.
On Saturday, the Catalan regional government confined residents of the comarca of Segrià, in Lleida, after several outbreaks were detected in fruit companies, a food firm, a seniors’ residence, a residential block, and a hostel for homeless people, according to Spain’s El País newspaper.
In the U.S., the Centers for Disease Control and Prevention reported on Tuesday that among 23 states reporting COVID-19 outbreaks in meat and poultry processing facilities, there were 16,233 cases in 239 facilities, including 86 COVID-19-related deaths. Among 9,919 (61%) cases in 21 states that disclosed racial and ethnicity, 87% occurred among minority workers.