LONDON — Is Boohoo taking its first steps toward transparency and more ethical production? The fast-fashion retailer published an updated and shortened list of its U.K. manufacturers, having vowed to make changes after a sweatshop scandal last summer — much to investors’ relief.
Post-announcement, there was a small 0.1 percent uptick on the group’s share price, which closed at 3.33 pounds.
The online retailer said it had culled its supplier list, and is now working with 78 British companies, compared with the 500 manufacturers it had been partnered with until last year.
“The group has ceased doing business with a number of manufacturers who were unable to demonstrate the high standards of transparency required, despite being provided with opportunities to address any issues identified during the auditing process,” Boohoo said.
Among the axed suppliers are a number of factories in Leicester, England, which had been linked with a spike in COVID-19 cases last summer. They had been accused of poor labor practices and lack of health and safety regulations in separate reports by The Sunday Times of London and the activist group Labour Behind the Label.
Boohoo’s latest move is a result of an Agenda for Change program it laid out following the Leicester factory allegations — which also sent its share price tumbling. The program aims to change the way that all Boohoo brands work with their suppliers, by mapping out manufacturing partners and auditing them on a regular basis.
The company also plans to stop sub-contracting jobs in order to have better visibility over its supply chain.
According to the latest report by Sir Brian Leveson — the retired judge who has been appointed by Boohoo to oversee the overhaul of its supply chain — approved suppliers must recruit their staff on contracts varying from 24 to 48 hours a week; pay “no less than minimum wage” as well as overtime, and include pension contributions, holiday entitlement and sick leave in their contracts.
“The intervention of a more intrusive audit has dramatically changed the way industry is run in Leicester and created a level playing field upon which to compete and grow,” added Leveson.
Boohoo said the changes to its supply chain have been implemented by a “significantly strengthened” in-house compliance team and independent auditors, who examined suppliers twice in the last eight months, including during evenings and weekends.
Regular audits will continue, the company said.
“This is not the end of the project for us, but the beginning of a new way of working with our suppliers. We have faced up to the problems of the past, and want to play our part in rebuilding a vibrant manufacturing base in Leicester,” said Boohoo’s chief executive officer John Lyttle.
As a digital pureplay, the retailer fared well throughout the pandemic but its spending has also been up. In the last year and a half, it has scooped a series of ailing high-street labels including Warehouse, Oasis, Debenhams and Arcadia’s Dorothy Perkins, Burton and Wallis — so doing damage control was necessary, to keep up with increased costs.
Response from analysts was positive, with Jefferies predicting further rise in the share price as a result of the publication of the report.
“We see today’s publication of a fully audited U.K. supplier list as an important step in reestablishing trust in the business and momentum in the shares. We look for investor focus to begin to turn back to trading and valuation fundamentals,” Jefferies said in a statement.
Anessa Sherman, senior analyst at Bernstein, added: “We view this as another step toward regaining investor trust and shedding the ESG overhang on the stock.”
Earlier this month, Boohoo made headlines again following reports that the U.S. Customs and Border Protection agency was investigating “forced labor” allegations linked with Boohoo and the Leicester manufacturers it works with.
The publication of its U.K. manufacturing partners and decision to ban sub-contracting could also help its U.S. business continue to operate.