boohoo Group PLC (LON:BOO) faces a growing social media backlash over its response to allegations of poor working practices at a supplier in Leicester, according to one broker.
Shares in the AIM-listed group shed a further 10% today despite management launching an independent investigation into conditions throughout its supply chain.
The fashion group has now seen its share price tumble 40% after allegations at the weekend that the supplier was paying well below the minimum wage and operating almost slavery-type working conditions,
Since Monday, the Nasty Gal and PrettyLittleThing owner’s market value has tumbled £2bn to just over £3bn.
Russ Mould, investment director at AJ Bell, said the company’s crisis management efforts aren’t stemming the growing backlash against the company.
“The change in stance towards the retailer is quite remarkable.
“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.
“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.
“Undertaking a thorough review of its supply chain should have been done a long time ago as allegations about poor supplier working practices date back to 2017.
“A social media backlash is now building against Boohoo as the likes of Next and ASOS temporarily stop selling its clothes and reality TV star Vas J Morgan becomes the first influencer and former Boohoo collaborator to boycott the brand.”
Another broker, Liberum, had heavily criticised the group’s response at the weekend but said today that its four-point plan to restore confidence was a step in the right direction.
boohoo announced an independent review led by Alison Levitt QC, a £10mln investment into the supply chain to improve ESG credential and plans to appoint ethical specialist Verisio to examine internal auditing along with two new non-executives.
Liberum says it is a huge fan of the company’s strategy, but having downgraded to its rating to 'hold' at the weekend, it needs some comfort to come out of the investigations.
Shares fell 12% today to 231p.