Boohoo scandal costs founders £335m
Shares crash 33 per cent in just two days
THE sweatshop slavery scandal engulfing Boohoo has cost its founders more than £335m in just two days.
Its shares fell another 11.9pc, or 35.3p, yesterday to 261.4p – taking losses so far this week to 32.5pc.
That has wiped £1.6bn off the value of the company, and cost founders Carol Kane and the Kamani family a fortune.
The rout came as the firm faced a fierce backlash over allegations of sweatshop slavery. Two of the fast fashion giant’s suppliers allegedly paid workers between £3.50 and £4 per hour to make clothes for its brands.
Fashion powerhouses Next, Asos and Zalando yesterday said they would cut ties with Boohoo pending an investigation of its supply chains.
Next, a FTSE 100 retailer, launched an investigation, adding: ‘There is a case for Boohoo group to answer.’
In recent days, the Health and Safety Executive, the National Crime Agency and HM Revenue and Customs have all confirmed they are investigating the Leicester garment industry at the centre of the scandal.
The family of Mahmud Kamani, who set up Boohoo with Kane in 2006, together hold an 18.6pc stake, meaning they have lost £296m in two days. Kane holds a 2.5pc stake, meaning her fortune has taken a £39.5m hit.
This week critics said the billionaire Kamani family are the ‘unacceptable face of fast fashion’ as the enormous wealth they have accumulated was contrasted with the low wages in their factories.
Even after the share price collapse the firm is worth £3.3bn – almost twice the size of Marks & Spencer, which is valued at £1.8bn. Boohoo generated £1.2bn in sales last year from 14m customers, and lockdown sales surged 45pc in the three months to May 31 compared to the same period last year.
Mahmud Kamani, the 55year-old patriarch, started his career by selling cheap clothes to market stallholders and brands including H&M and Primark. In the Noughties he cut out the middle man, and turbo-charged fast fashion to reduce lead times so new styles could be brought to market quickly.
Sons Adam, 30, Samir, 24, and Umar, 34, co-founded Pretty Little Thing (PLT) at arm’s length from Boohoo before it listed on the stock market. The family connection helped. In May Boohoo bought out Umar Kamani’s remaining 33pc in PLT for almost £330m. Umar Kamani shares his glamorous lifestyle, littered with private planes, yachts and models, with his 779,000 followers online. For Kane wealth has bought her a 17th century stone manor house in the Staffordshire countryside. Among vehicles parked in the grounds are a Bentley, an Aston Martin sports car and Range Rover.
The founders’ wealth has not stopped them seeking further prizes. Two weeks ago the company said the founders would be in line for a £50m bonus each if shares rise twothirds in the next three years.
A senior company source said: ‘I’m very disappointed. Mahmud and Carol were meant to stand back a bit but they’ve taken an opportunity.’ Boohoo is also fighting off a short attack from a hedge fund whose founder is known as the ‘Dark Destroyer’.
The pressures are leaving investors jittery.
One site for small shareholder advice, the Motley Fool, said: ‘I don’t feel confident investing in an expensive stock when I’m not sure if I can trust management.’
Big City investors that look after billions of pounds of savers’ money have also voiced concern. Aberdeen Standard Investments said that it had quizzed Boohoo on the allegations.