Boohoo faces boycott from influencers
Trainers and sportswear seller was a star of the high street but even its outstanding performance cannot buck the gloom of new normal
BOOHOO could face an exodus of the prized social media influencers who promote its clothes after a reality TV star called for a boycott over a “sweatshop” scandal.
The comments by Vas J Morgan pose a threat to the fast-fashion business, which relies on celebrities to talk up its products online. It spent at least £90m on celebrity endorsements and other marketing costs last year.
Mr Morgan said he was saddened by revelations that some Boohoo clothes were made in a Leicester factory accused of paying illegally low wages.
On Instagram, he said: “My heart hurts for the families that have suffered at the hands of companies that fail to do due diligence … Companies that make billions off the back of hard-working people trying to feed their family.”
Mr Morgan appeared on ITV show The Only Way Is Essex until 2018. He said he had collaborated with Boohoo as well as professionally and personally supporting its brands, which also include Nasty Gal and PrettyLittleThing.
Three Irish influencers also said they were either pausing work with the brands or had demanded answers.
Boohoo has launched an investigation and vowed to cut ties with unethical suppliers.
Along with Next, Games Workshop and one or two others, JD Sports is among a select group of retailers who have comprehensively destroyed the myth that the high street is dead. The chain came into the crisis firing on all cylinders. Turnover leapt nearly a third from £4.7bn to £6bn in the year to the start of February, and profit jumped by a quarter to £439m, beating the highest estimate of City analysts.
In a normal world, record financial figures would be the trigger for further impressive stock market gains. Yet its shares took a sizeable 3pc hit in early trading.
In the rubble of ground zero, past performance counts for little. The focus is on the here and now. Investors only really care about what the recovery looks like and even at JD Sports the mood is decidedly sombre.
Skip past the “highlights” section of the announcement, all the talk of “record results” and “international development”, plus the boast about strong trading in America, and the picture is sobering. Footfall in its European stores has remained “subdued” despite reopenings, and chairman Peter Cowgill expects “uncertain” footfall “for the foreseeable future”.
There is even a warning that social distancing measures disproportionately punish its stores, where trading is largely condensed into the weekends and school holidays.
Cowgill is no less gloomy about the long-term outlook, admitting to “considerable uncertainty” about consumer behaviour.
This is the world that companies are now operating in. Trading hasn’t magically returned to pre-crisis levels now that lockdown has lifted. It is way below where it was and chief executives have no idea when it will rebound, if at all. Some fear it may never do. As JD Sports says, “consumers remain nervous” about “enclosed spaces”.
Take Whitbread, operator of the nationwide Premier Inn hotel chain. Having been forced to close all of its 270 sites, apart from 39 that remained open for key workers, the end of lockdown couldn’t come soon enough. Sales plunged 80pc in the 13 weeks to the end of May. Yet, it is already warning of “volatility” in countries that lifted restrictions earlier.
In the UK, it says there is “good demand” in “traditional” tourist destinations but other regions, including London, “remain subdued”. Even an attempt to talk up a recent £1bn rights issue risks backfiring. Yes it has strengthened the balance sheet but only in anticipation of “a long period of low revenues”. No wonder the shares dropped by more than 5pc.
Chief executives are trapped between having to be honest and wanting to remain positive. Cowgill insists JD Sports can still “prosper”, while Whitbread’s Alison Brittain would have us believe that it will emerge from the crisis in a stronger position.
But if you don’t know what the future will look like how can you be so sure that you will be OK?
‘In the rubble of ground zero, past performance counts for little’
Fickleness of fashion
“The truth will always come out” came a cryptic but quickly deleted tweet from Umar Kamani, the son of Boohoo founder Mahmud, as the fallout from fresh allegations of labour exploitation in Leicester’s clothing sweatshops continues.
Of course Kamani junior may have been referring to something else entirely but the timing is unfortunate. He is also the boss of its most successful brand PrettyLittleThing, so not just a rogue family member running loose on social media.
Boohoo and the Kamani family, who have made a fortune off the company’s success, need to demonstrate that they are taking the claims seriously by conducting a sweeping audit of the supplier base. Boohoo has said it sees worker welfare as an “absolute” priority and is investigating but after tumbling 23pc on Monday, its share price took another, albeit smaller, hit yesterday.
An even bigger concern may be the intervention of others. After Next pulled Boohoo products from its online store saying the fast-fashion giant “has a case to answer” over allegations of labour exploitation, Asos and Zalando followed suit. Meanwhile one reality TV star and “influencer” has called for a boycott.
Both could quickly spiral into a wider backlash, including customers, that threatens long-term damage to the Boohoo brand. There’s nothing more fickle than fashion.
The loss of 500 jobs at newspaper publisher Reach underlines how the crisis is accelerating change everywhere.
Unfortunately, despite the best efforts of the owner of the Mirror and Express titles, that change is likely to be towards a smaller and less profitable company. There will be plenty more like it.
Vas J Morgan, a former star of ‘The Only Way Is Essex’, said he was saddened by claims some Boohoo clothes were made in a Leicester factory accused of paying illegally low wages