Boohoo suffers as major investor cuts stake over sweatshop claims
EMBATTLED fast fashion firm Boohoo suffered a fresh blow yesterday after one of its biggest investors sold down its stake and described the firm’s response to illegal pay allegations as “inadequate”.
The £3.5bn company’s efforts to defend itself against sweatshop claims were dismissed by Standard Life Aberdeen (SLA), previously one of Boohoo’s biggest investors, which has now sold most of its 3pc holding in the company.
Boohoo has insisted there is no evidence its suppliers are paying staff less than the minimum wage following claims reported earlier this week. But the company, which sells dresses online for as little as £4, has faced a growing backlash over working conditions at businesses which it partners with.
SLA was the first shareholder to break cover, and issue a public rebuke to management, piling pressure on other investors to follow suit.
Lesley Duncan, of SLA, said: “Having spoken to Boohoo’s management team a number of times this week in light of recent concerning allegations, we view their response as inadequate in scope, timeliness and gravity.”
SLA sold two thirds of its stake, or 27 million shares, following questions this week about why its “ethical” ASI fund owned stock in a fast fashion brand.
Invesco, Boohoo’s third biggest shareholder, is now considering its own position. A spokesman said: “We take issues of company governance very seriously, and will be investigating these reported concerns to assess their circumstances and validity.”
Investors who sell now will suffer a substantial paper loss compared with their position a week ago. From the start of the year until Friday last week, Boohoo shares had risen 30pc. They have crashed 28pc since allegations were aired by The Sunday Times.
Boohoo’s second largest investor, Jupiter, risked the wrath of activists by edging up its stake this week to 10pc, saying it had decided to take advantage of a weak share price.
A Jupiter spokesman said it was aware of the accusations, but had previously visited several suppliers to Boohoo in the UK, and was satisfied with the retailer’s reassurances.
Boohoo’s employee benefit trust has also seized on the slump to buy stock for its future bonus awards.
The shares edged down by 6p, or 2pc, to close at 279p yesterday.
A Boohoo spokesman said: “Naturally we are disappointed that [Aberdeen Standard Investments] have taken this decision in respect of some of their funds. We have been engaging extensively with our shareholders, and continue to take on board their feedback. We believe that our actions taken this week, including our recently announced independent review, make it very clear just how determined we are to ensure that our entire supply chain adheres to our code of conduct.”