Boohoo shares dive another 14pc amid sweatshop scandal

BOOHOO shares fell another 14pc yesterday as it struggled to draw a line under the sweatshop slavery scandal.

On a third day of heavy selling on the stock market, the fast fashion giant launched an independent investigation led by a top barrister into its supply chain, and pledged to beef up its board with more directors.

it will invest an initial £10m to stamp out malpractice and said it has ditched two suppliers accused of employing staff on slave wages.

investors were not convinced by the moves and another £465m was wiped off Boohoo’s market cap, leaving it valued at £2.8bn. the latest sell-off – down 36.9p to 224.5p – took losses so far this week to 42pc.

that has wiped more than £2bn off its value in three days. Founders Carol Kane and the Kamani family, have seen their fortunes collapse by a total of £433m since Monday.

But in a rare sign of optimism, Jupiter Fund Management increased its stake from 9.82pc to 10.32pc.

in a statement to the stock market, Boohoo said its board was ‘shocked and appalled’ by the accusation that its clothes were being made by staff working on £3.50 per hour.

suppliers have also been accused of flouting social distancing measures where staff felt required to come to work when they were sick.

it said: ‘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.’

it said Alison Levitt QC, a leading business crime barrister, would lead an inquiry into the UK supply chain. the firm will invest an initial £10m to ‘eradicate supply chain malpractice’, and it would accelerate a review of the way its supply chain is audited with Verisio and Bureau Veritas.

it claimed it had not found evidence of workers being paid £3.50 but said two companies had broken its ‘code of conduct’ and it had terminated their contracts.

But analysts said investors were not convinced. russ Mould, investment director at AJ Bell, said: ‘the tide is turning. this is a clear statement from the company showing it is taking the matter very seriously. Unfortunately, the market doesn’t buy it.’

the firm is already fighting off a short- selling attack from UK hedge fund shadowfall amid widespread concern about governance. the fund said it was ‘scandalous’ that Boohoo paid £323m for a 33pc stake in Pretty Little thing to a member of the Boohoo founding family in May.

it called the transaction an ‘extraction of cash from the business to the family’.

then in June Boohoo’s directors announced a £150m bonus plan for its bosses, including up to £50m maximum each for Kane and Kamani senior.

this followed plans to award chief executive John Lyttle with £ 1m and salary increases of between 18pc to 30pc for other board members.

shareholder advisory Pirc said: ‘the reality is that the risks from poor labour practices were obvious. One group of employees who are getting paid above the minimum wage are the top brass. the contrast in fortunes could not be more stark’.

the supply chain review will check whether firms follow rules on minimum wage and social distancing, and that employees have the right to work in the UK.

Last week the National Crime Agency confirmed it would investigate Leicester’s garment trade after concerns over ‘human trafficking and modern slavery’.

But critics questioned why it has taken so long to act as four reports from 2015 to 2019 have exposed the dark side of the city’s clothing trade.

Boohoo buys between 75pc and 80pc of the city industry’s output. it uses UK suppliers so it can respond quickly to trends.