Boohoo’s troubles amid its Leicester “sweatshop scandal” deepened Wednesday after its alleged promotion of poverty wages and unsafe conditions prompted e-tailers Amazon, Asos and Zalando to jettison the ultra-fast-fashion company’s clothing from their lineups.
Next had already dropped Boohoo last week after growing reports that the brand had compelled its supplier factories in Leicester, England, to continue production despite Britain’s government-imposed COVID-19 lockdown, further spreading the contagion with inadequate social distancing and a dearth of personal protective equipment such as gloves and face masks.
Shares in Boohoo, which also operates Coast, PrettyLittleThing, MissPap, Nasty Gal and Karen Millen, have continued their downward dive in the wake of the revelations, tanking 43 percent to to 21.75 pence (27 cents) Wednesday and destroying more than a billion dollars in stock-market value in a matter of days.
Pre-scrutiny, Boohoo was on track to post a full-year pretax profit of 17.3 million pounds ($21.7 million), according to Reuters data.
Amazon said it was suspending the sale of all Boohoo brands because “selling partners are required to follow all applicable laws, regulations and Amazon policies.” (It owns Boohoo stock, the internet giant told CNN Business, through historical agreements and third-party sellers.)
Zalando, which is based in Germany, told BBC News that it “has made the decision to delist all products by Boohoo Group and subsidiaries and pause all new business with Boohoo effective July 7.”
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The pandemic led Zalando to implement “strict preventative measures to keep all employees safe while staying open for business,” a spokesperson said. “We expect our partners to apply similar fundamental priorities and will distance ourselves from those who don’t.”
“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 added.
Similarly, Next has concluded that “there is a case” for Boohoo to answer, a spokesperson told the Guardian. “As a result, last week Next removed the Boohoo and Pretty Little Thing branded items it was selling previously, from all Next websites.”
Next will be conducting its own investigation over the claims. “Next is not pre-judging the outcome of this process and no final decision has been made, however, while there is a case to answer, these labels will remain suspended from all Next websites,” the spokesperson said.
Asos is understood to have temporarily suspended its trading relationship with all Boohoo brands pending the outcome of any investigations.
Piqued shareholders are demanding answers in light of Boohoo’s sudden reversal in fortunes. The brand had previously thrived despite the pandemic as the Instagram and TikTok generation continued to flock to its online-only, super-trendy and hyper-affordable tops, dresses and bodysuits, which often recalled similar, pricier versions worn by celebrities such as Kim Kardashian West, Kylie Jenner and Cardi B. Boohoo produces at least 40 percent—and as much as 75 percent, per some reports—of its garments in Leicester and neighboring Manchester rather than overseas in order to rush out their copycat looks in time to seize the fleeting zeitgeist.
Jupiter Asset Management, which has a roughly 10 percent share in Boohoo through its Merian Global Investments arm, told the Guardian that it has been “actively engaging” with Boohoo over supply-chain management issues.
“We have been given strong assurances by management that any suppliers found to be in breach of the company’s strict code of conduct will be terminated immediately and we will continue to engage with the firm regarding this situation,” Jupiter said in a statement.
Invesco, which has another sizable stake, said it would be investigating the “circumstances and validity” of reports that workers at one of Boohoo’s Leicester suppliers were paid as little 3.50 pounds ($4.40) per hour, despite the minimum wage in Britain for those aged 25 and older being 8.72 pounds ($10.97).
“While we don’t generally comment on rumors in the press about the companies we invest in, we take issues of company governance very seriously and will be investigating these reported concerns,” an Invesco spokesperson told the Guardian.
The Gangmasters and Labour Abuse Authority announced Tuesday it had joined with Leicestershire police, the Leicester city council, the National Crime Agency, the Health and Safety Executive, Leicestershire fire and rescue and Immigration Enforcement to inspect garment factories in the city for signs of modern slavery and other illegal activity, though it has found no “requirement for enforcement action” thus far.
Boohoo fended off accusations Wednesday, saying in a statement that it takes “extremely seriously all allegations of malpractice, poor working conditions and underpayment of workers.”
It added that it is launching an independent review of its U.K. supply chain and will not hesitate to terminate suppliers that do not hew to its “strict code of conduct.” In addition, Boohoo says it has earmarked 10 million pounds ($12.5 million) to eradicate “supply chain malpractice.” Last year, the brand hired Veriso, an ethical audit firm, to support its own in-house compliance team by conducting unannounced visits to supplier factories.
“We are committed to doing everything in our power to rebuild the reputation of the textile manufacturing industry in Leicester,” a spokesperson said.
In February, Andrew Bridgen, Minister of Parliament for North West Leicestershire, denounced low-wage factories as Leicester’s “dirty secret” and a “national shame” that cannot be allowed to continue. A 2018 Financial Times investigation reported that the city’s so-called “dark factories” have become so “detached from U.K. employment law” that they function as “a country within a country” where production speed and output are valued over people.
Leicester harbors the second-highest number of textile manufacturers in the United Kingdom, with 1,500 factories employing 10,000 textile workers, according to the Leicester City Council.