Online fashion retailer Boohoo has launched an independent review of its UK supply chain after allegations about working conditions at one factory.
The company said it was “shocked and appalled” by claims in the Sunday Times that workers at a site in Leicester were being paid as little as £3.50 an hour, well below the minimum wage.
Boohoo said on Monday that it was looking into the allegations – but that was not enough to halt a steep decline in its share price which saw more than £1bn wiped off its market value. Shares lost another 12% in morning trading on Wednesday despite the announcement.
Meanwhile, retailers Next, Asos, Zalando and Very.co.uk have dropped Boohoo clothing from their websites.
Boohoo said in a statement on Wednesday that an independent review of its UK supply chain would be led by a QC, Alison Levitt.
It has also committed to investing £10m to “eradicate supply chain malpractice” and said it would accelerate a separate third party supply chain review using ethical and compliance specialists.
The company said: “As a board, we are shocked and appalled by the recent allegations that have been made and we are committed to doing everything in our power to rebuild the reputation of the textile manufacturing industry in Leicester.
“We want to ensure that the actions of a few do not continue to undermine the excellent work of many suppliers in the area, who succeed in providing good jobs and good working conditions.
“We take extremely seriously all allegations of malpractice, poor working conditions, and underpayment of workers.”
Boohoo said it “will not hesitate” to drop suppliers that mistreat workers and would welcome the chance to work with the Home Secretary and the local authority “to help eliminate any instances of labour malpractice in Leicester”.
The Sunday Times report centred on a site which continued to operate when Leicester was put back into lockdown last week – and where it was alleged that appropriate safety measures had not been put in place.
Boohoo said its own findings showed there were “some inaccuracies” in the report.
“The garments featured were not actually manufactured in Leicester, but in Morocco,” the group said.
“Post production, the garments were shipped back to the UK by the supplier to be repackaged into compliant boxes for delivery to the Group’s international distribution centre in Burnley.
“This was the process that was filmed.”
Boohoo, which operates brands including Nasty Gal and Pretty Little Thing as well as Karen Millen and Coast, said it had found no evidence of suppliers paying workers £3.50 an hour.
However, it said it did find other evidence of non-compliance with its code of conduct and immediately decided to end its relationship with two suppliers.
Boohoo said the independent review of its UK supply chain would focus on compliance with minimum wage and COVID-19 regulations as well as working hours and record keeping, right-to-work documentation and employment contracts.
It will publish an initial update on the review in September alongside half-year results.
Boohoo has enjoyed rapid growth since it was founded by Mahmud Kamani and Carol Kane in Manchester in 2006.
By the close of trading last week, it was worth more than £5bn – more than double the value of Marks & Spencer, Britain’s largest clothing retailer by sales.
But a third day of successive slumps in the share price has seen its market value fall to around £3bn.
Russ Mould, investment director at AJ Bell, said: “Only a few weeks ago everyone was applauding Boohoo for its ability to continue growing during the pandemic and investors were bidding up its share price to new record highs.
“Now in the space of days the share price is falling fast, and a growing army of people are sharpening their knives.
“A clear statement from the company in response to allegations of modern slavery shows it is taking the matter very seriously. Unfortunately, the market doesn’t buy it.”