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Sweatshop Scandal Can’t Stop Boohoo’s Holiday Sales

Boohoo appears to have experienced little customer blowback about potential sweatshop-like working conditions in its U.K supply chain, even as Brian Leveson, the retired judge overseeing an overhaul of the ultra-fast-fashion e-tailer’s business practices, said that efforts for greater due diligence remain a “work in progress.”

Buoyed by the surge in online shopping due to rolling lockdowns and store closures amid the second wave of the coronavirus, Boohoo’s sales increased 40 percent to 661 million pounds ($902.2 million) in the four months to Dec. 31, surpassing analysts’ predictions of 29 percent growth.

The company, which also owns the PrettyLittleThing, Nasty Gal, Oasis and Warehouse brands, told investors in response that it’s counting on revenues to grow between 36 percent and 38 percent for the financial year ending February, exceeding its earlier—and already upgraded—guidance of between 28 percent and 32 percent. It also expects to deliver an adjusted earnings before interest, taxes and depreciation margin of roughly 10 percent “despite Covid-19 related headwinds for distribution costs, planned gross margin investment and accelerated discretionary customer acquisition spend.”

Boohoo has a current net-cash position of 386.9 million pounds ($527.9 million), up from the 344.9 million ($417.5 million) it carried at the end of August, providing it with a financial cushion to “support future growth.” The e-tailer says it is “close to finalizing” a new warehouse in Wellingborough, 45 miles outside of Leicester, that will create up to 1,000 jobs when it opens in April.

In contrast, revenue from discount rival Primark, which has shied away from selling online, tumbled 30 percent over the past quarter. It is also anticipated to only “broadly break even” in the first half of 2021, compared with adjusted operating profits of 441 million pounds ($533.6 million) for the same period last financial year.

“The group is in an excellent position entering 2021, which we expect to be another year of progress toward our goal of leading the fashion e-commerce market globally,” Boohoo CEO John Lyttle said in a trading update last week.

Despite Boohoo’s banner performance, allegations of worker abuse and underpayment of wages in some of its supplier factories continue to cast a long shadow. The retailer engaged Leveson following an independent review by legal advisor Alison Levitt that found “widespread if not endemic” safety violations and underpayment of workers at its Leicester factories, which produce just under half of its total inventory.

Leveson has oversight of Boohoo’s Agenda for Change program, which the company rolled out last year to improve its corporate governance, redefine purchasing practices, support workers’ rights and raise standards across its supply chain, thereby “demonstrating best practice in action.” In addition, Boohoo says it has cut ties with 64 of its Leicester suppliers since last summer’s imbroglio, “with further investigations ongoing.”

“It is important to set a shared clear vision of the future, reinforcing the ethics and compliance agenda through corporate change and to announce what boohoo will look like after implementation of Agenda for Change,” Leveson said in his first remarks. “This must be clearly articulated by the board and cascaded from the top of the group to the most junior staff. Failure to do so will pose a risk to the progress and ultimate success of the program.”

Though Leveson says he sees a “determination to achieve real change,” which is to be commended, it’s also clear that “there is a long way to go” to implement the recommendations from Levitt’s review, such as improved supplier audit and compliance procedures. Boohoo and Leveson will continue to provide stakeholders with further updates on the program throughout 2021, including the publication of its first annual sustainability report alongside its annual report and accounts. The e-tailer, which targets customers from their mid-teens to early twenties, is also working with accounting giant KPMG to create a Responsible Sourcing Indicator, derived from a series of industry-recognized metrics and key performance indicators, that will allow it to identify any issues or deviations in a quantitative manner.

“I’d like to take this opportunity to thank our team for their exceptional hard work over the last few months, and to reinforce our commitment to being a leader for positive change in U.K. textiles manufacturing,” said group executive chairman Mahmud Kamani, who defended his company at a parliamentary hearing last month. “We have lots to do still, but an exciting year lies ahead for Boohoo and our multi-brand platform in 2021.”

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