Boohoo Rebounds After Early Inspections Ease Investors’ Concerns

Shares in Boohoo Group Plc bounced back after U.K. authorities said early inspections of apparel factories in Leicester, England, found no evidence of modern slavery offenses.

The gain of more than 25% Thursday morning comes after three days of steep losses for shareholders who have asked the Investor Forum, a U.K. body that speaks for influential fund managers on social responsibility, to help address concerns about the possible exploitation of labor in the online retailer’s supply chain.

A statement from the Gangmasters and Labour Abuse Authority said that “officers have not at this stage identified any offenses under the Modern Slavery Act.” No enforcement action was taken during the visits, the agency said, in news reported earlier by the Financial Times.

The authority is one of seven bodies carrying out inspections of facilities in Leicester following reports that workers at factories supplying Boohoo were paid less than minimum wage and were forced to work during the coronavirus lockdown. The National Crime Agency said its visits are likely to continue but it will not “give a running commentary.”

The boost in Boohoo’s shares comes after the stock’s value fell by more than 40% earlier this week.

Merian Global Investors, the second largest Boohoo investor, has said it is “actively engaging” with the apparel retailer on labor issues. Shareholders have also asked the Investor Forum, which was created six years ago following a review of U.K. equity markets that advocated for increased corporate accountability, to intervene.

Challenging Companies

The forum acts as a mediator and aims to help “escalate material issues” with the boards of London-listed companies. Members, which collectively manage trillions of pounds worth of assets, include BlackRock Inc. and Schroders Plc. In the past the forum has engaged with Mike Ashley’s Frasers Group Plc, formerly known as Sports Direct, which has faced its own allegations about the exploitation of labor. The group tends to be discreet about which companies it targets and takes on only a handful of typically high-profile situations a year.

Boohoo has promised an independent review of its supply chain and said Wednesday that it cut ties with two suppliers that infringed its code of conduct, in an effort to eliminate labor abuses in Leicester, a sourcing hub. It has also hired Alison Levitt, a lawyer and former U.K. public prosecutor, to lead the independent review, along with Bureau Veritas, a compliance specialist. The company said its own investigation has shown no evidence of suppliers paying workers 3.50 pounds ($4.40) an hour, as a newspaper report had alleged.

A spokesman for the Investor Forum declined to comment. A Boohoo spokesman said the company had not been approached by the group but would be willing to engage constructively if it did.

The forum’s potential involvement is a further sign of the widening crisis facing Boohoo, which is attempting to address concerns that it has not had adequate oversight of the factories supplying it with 6 pound miniskirts and other fast fashion that has fueled its rapid growth.

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