Boohoo surges after agencies find no modern slavery
Boohoo shares jumped after UK authorities found no evidence of modern slavery in its supply chain and investors bet the company would recover from allegations about treatment of workers in factories.
The fast fashion brand's shares rebounded after three days of heavy falls, rising 32.3% to 297p at 11:14 BST.
The Financial Times reported that seven government agencies had visited factories in Leicester after allegations about illegal working practices at sites in Boohoo's supply chain. The Gangmasters and Labour Abuse Authority told the FT: "Officers have not at this stage identified any offences under the Modern Slavery Act" and that no enforcement measures were taken.
A press report at the weekend alleged workers in a Leicester factory were paid £3.50 an hour - less than half the minimum wage - and that workers were forced to work during the Covid-19 lockdown without personal protection equipment. About three-quarters of the clothes made in Leicester's 1,000 or so factories are reported to be for Boohoo.
On Wednesday Boohoo commissioned an independent review of its supply chain led by Alison Levitt, a senior white collar crime barrister and pledged to spend £10m, including the cost of the review, to weed out malpractice including in Leicester. The plan did not stop Boohoo shares falling, taking the reduction in its market value since Friday to about £2bn. Analysts said the matter could lead to higher costs and customer boycotts.
But on Thursday sentiment shifted as some investors decided the shares' plunge was a buying opportunity for a company that had grown rapidly over the past few years.
Michael Hewson, chief market analyst at CMC markets, said: "Boohoo shares are also sharply higher this morning as buyers start to return after the precipitous falls of earlier this week with some saying that the declines have been too severe, when set against the underlying long-term fundamentals."
Analysts at Peel Hunt said the company had got on to the front foot by pledging to support Leicester, which has been the subject of several reports about poor working conditions.
"We’ve seen regular exposes into UK and overseas supply-chain conditions, which rest on a high-profile company such as Boohoo or Primark," Peel Hunt said. "By accepting the need to rebuild Leicester’s reputation, Boohoo is stepping up to the plate, rather than brushing this aside. Fundamentally, we see the share price fall as a buying opportunity, accepting that ESG [environment, social and governance] remains a work in progress for Boohoo.