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ALEX BRUMMER: No tears for Boohoo

ALEX BRUMMER: What started as a supply chain problem has reached Boohoo’s share price and can quickly spread to something far worse

The Boohoo story is well known. Humble beginnings on a market stall in Manchester to become a stock market star.

Marks & Spencer, Tesco and upholstery group Dunelm have similar inspiring stories about rags to wealth. Boohoo and other pioneering online retailers, Asos in fashion and Ocado in the supermarket, caught the zeitgeist in the lockdown.

If all goes well, investors are reluctant to look under the hood. But there are questions to be asked. Is there too much power with co-founder Mahmud Kamani, who is ‘executive’ chairman? Even with a reduced market value of £ 3.5 billion, why is Boohoo still listed on the less regulated AIM market?

Ethical Practices ?: On the supply side, the warning signs have been around for a while, despite claims that they `` created a sustainable business that minimizes environmental impact ''

Ethical Practices ?: On the supply side, the warning signs have been around for a while, despite claims that they “ created a sustainable business that minimizes environmental impact ”

Boohoo’s 2020 report and accounts show a number of related party transactions and a review of past earnings. The firm’s accountants Price Waterhouse Coopers are also employed as tax and compensation advisors, creating potential conflicts. And Boohoo’s primary residence is inexplicably in Jersey.

On the supply side, the warning signs have been around for a while, despite claims that they “ created a sustainable business that minimizes environmental impact. ” There should come as no surprise at the conditions of the sweatshop in their garment factories that were already recorded by the University of Leicester in 2015.

Why should such working conditions and bad wages continue to exist for so long under the supervision of enforcers such as Health & Safety and HMRC. It is of little use if the government raises national living wages to £ 9.30 an hour (outside London) if employers and regulators do nothing to ensure it is paid. What is especially disturbing in Leicester is that many of those in dire working conditions are from the South Asian community.

Admiration for the entrepreneurship of Boohoo founder Kamani and his family and co-founder of designer Carol Kane is undermined by alleged supply chain malpractices.

Until the recent revelations, there was a tendency to give Boohoo’s claims of the highest ethical practices the benefit of the doubt. They say they knew nothing about low wages or working conditions.

Standard Life Aberdeen (SLA) is the first major battalion investor to head to the door, and you can’t imagine it will be alone. Boohoo’s financial practices were also examined during the lockdown. Hedge fund ShadowFall was critical of Boohoo’s £ 200 million fund-raising in lockdown, ostensibly to take advantage of opportunities.

The first major to emerge was that the chairman would spend £ 269.8 million (it could add up to £ 328.8 million) to buy out a 34 percent stake in Pretty Little Thing from his son Uma .

Top Boohoo executives then entered a potential £ 150 million bonus scheme in ‘Persimmon style’. If ever there was a bad time for bosses to reward themselves, it was a pandemic at an average-wage supply chain company.

The independent review led by Alison Levitt QC will examine regulations, working hours and accounting. Most of this business activity may be through consumers of £ 5 frocks from Boohoo. But we know from other diminished fashion brands like Ted Baker how fast it is possible to go from hero to zero.

What started as a supply chain problem has hit Boohoo’s stock price and can quickly spread to something far worse.

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