Fast fashion retailer Boohoo (BOO.L) has announced an independent investigation into its supply chain, following allegations of illegal and unsafe working conditions at UK factories that make its clothes.
Boohoo said on Wednesday it had hired top lawyer Alison Levitt QC to lead an investigation. Levitt and a team including Boohoo deputy chairman Brian Small will investigate working hours, compliance with COVID-19 regulations, and minimum wage payments at factories that supply Boohoo.
The company also pledged to invest an “incremental” £10m ($12.5m) into its supply chain to eradicate malpractice and said it would accelerate a separate third party review into conditions in its supply chain. New independent board members are also being recruited.
The commitments come after a series of allegations about working conditions at factories supplying the company.
On Saturday (4 July), the Guardian ran a report suggesting Boohoo may have relied on factories in Leicester that did not close during lockdown, which could have contributed to the current COVID-19 outbreak in the city.
The Sunday Times followed with an undercover exposé alleging workers were paid as little as £3.50 ($4.37) an hour in Leicester factories supplying Boohoo, far below the minimum wage of £8.72 an hour. Home Secretary Priti Patel promised a crackdown on the Leicester garment industry in the wake of the reports.
“As a board we are deeply shocked by the recent allegations about the Leicester garment industry,” Boohoo chief executive John Lyttle said in a statement on Wednesday.
“We wish to reiterate how seriously we are taking these matters and we will not hesitate to terminate any relationships where non-compliance with our Code of Conduct is found.”
Boohoo said its initial investigation into the factory featured in the Sunday Times report has not found evidence of workers being paid £3.50 an hour. However, it had uncovered “other evidence of non-compliance”. Boohoo said it had terminated its relationship with two suppliers involved.
The scandal has so far wiped almost £1.5bn off Boohoo’s value, with shares falling by over a third since the weekend.
The stock fell another 8% on Wednesday morning. Late on Tuesday it emerged that retailers Asos (ASC.L), Next (NXT.L), Zalando (ZAL.DE), and Very.co.uk had stopped stocking Boohoo’s clothing amid the allegations.
Analysts at stockbroker Shore Capital downgraded Boohoo to a “sell” rating on Wednesday, warning the company could face a consumer boycott and saying increased compliance measures would likely lead to increased costs.
“All these measures look sensible at first glance, but the genie is already out of the bottle,” analysts Greg Lawless and Clive Black wrote in a note.