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Boohoo Shares Slide Amid Leicester ‘Sweatshop Scandal’

Plummeting stock prices. Disavowals from social-media influencers. A criminal investigation. Boohoo’s alleged “sweatshop scandal” has plunged the formerly pandemic-proof fast-fashion e-tailer into a reputational maelstrom that some observers say may mark the beginning of its end.

It’s been hit after hit for the Instagram darling. Last week, a Labour Behind the Label report accused the brand of pressuring some of its supplier factories in Leicester, England, to continue production despite the nationwide COVID-19 lockdown.

“We have reports that factories operating for Boohoo continue to operate at full capacity, with little or no social distancing and provision of [personal protective equipment] or sanitizing stations,” the labor-rights group wrote in its report. “Workers have reported that furlough fraud is commonplace and that many factories are being pressured to continue production—or even increase it—to keep up with new orders.”

A Mirror article that followed blamed Boohoo’s fast-and-loose production practices with the spike in coronavirus cases in Leicester, which has been compelled to stay in lockdown despite restrictions easing in the rest of the United Kingdom.

Boohoo sources at least 50 percent of its clothing, and up to 75 percent, according to some reports, in Leicester and neighboring Manchester, where thousands of garment workers are believed to toil under conditions of modern slavery, such as starvation wages, exploitative hours and unsafe workplaces.

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An undercover Sunday Times investigation, published over the weekend, further alleged that Jaswal Fashions, which makes clothing for Boohoo subsidiary Nasty Gal, continued to operate during the localized lockdown operating without additional hygiene or social distancing measures. The undercover reporter spent two days packing garments for Nasty Gal for 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).

A spokesperson from the brand told the Financial Times Monday that its early investigations revealed that “Jaswal Fashions is not a declared supplier and is also no longer trading as a garment manufacturer.” It’s taking “immediate action to thoroughly investigate how our garments were in their hands,” it added.

Boohoo previously said in a statement that the company has monitored its suppliers correctly, and that it “does not tolerate any incidence of non-compliance especially in relation to the treatment of workers within our supply chain.”

Amid the news, however, Priti Patel, Britain’s home secretary, has called for the National Crime Agency to investigate Leicester’s clothing factories for the alleged illegal practices.

“I will not tolerate sick criminals forcing innocent people into slave labor and a life of exploitation,” Patel said in a statement. “Let this be a warning to those who are exploiting people in sweatshops like these for their own commercial gain. This is just the start. What you are doing is illegal, it will not be tolerated and we are coming after you.”

Boohoo’s shares plunged by 23 percent Monday, ceding more than 1.5 billion pounds ($1.9 billion) in stock market value in the wake of the bruising revelations. The e-tailer is now worth one-third less than it was on Friday afternoon, breaking a winning streak that saw the company amass a value of 5.2 billion pounds ($6.5 billion) as recently as last month.

While the rest of retail languished due to boarded-up storefronts and sluggish consumer confidence, sales for Boohoo soared by 45 percent to 367.8 million pounds ($462.3 million) in the three months leading up to May, a ringing endorsement of its online-only business model and resonance with teens and young adults hungry for cheap, trendy threads modeled after looks worn by Kim Kardashian West, Cardi B and other celebrities.

Even as brand after brand succumbed to bankruptcy, Boohoo plumbed its financial reserves to rescue Warehouse and Oasis from administration on June 16, expanding an empire that includes Coast, PrettyLittleThing, MissPap, Nasty Gal and Karen Millen.

Fast Fashion Giant Boohoo Sees Shares
Reality star Vas J Morgan urged influencers and TV personalities to “spare a thought for the women and men in these companies that were forced to work despite testing positive for COVID-19.” Isabel Infantes/PA Wire URN:54104801 (Press Association via AP Images)

But the ongoing imbroglio threatens to rip away Boohoo’s secret weapon: the social-media influencers who transmute hype and enthusiasm for its clothing into a steady stream of sales. The company has long relied on such indirect advertising, shelling out at least 90 million pounds ($113.3 million) on celebrity endorsements and other forms of marketing in 2019 to woo the Instagram generation.

Still, reality TV star Vas J Morgan, who has collaborated with Boohoo in the past, posted Tuesday about how “saddened” he was by the news.

“Slavery is slavery and my heart hurts for the families that have suffered at the hands of companies that fail to do due diligence like this,” he wrote on Instagram. “Companies that make billions off the back of hard working people trying to feed their family.”

“Money is always used to silence and oppress us and I understand that not many other influencers will speak up about this,” Morgan added.

He went on to urge “all of you influencers, TV stars” to “spare a thought for the women and men in these companies that were forced to work despite testing positive for COVID-19.”

Mahmud Kamani and Carole Kane, Boohoo’s co-founders, raked in more than 1.3 million pounds ($1.6 million) apiece for the past financial year.