Boohoo's shares plunge again amid 'modern slavery' reports

The value of former stock market darling Boohoo briefly slumped below that of arch-rival Asos this morning, amid reports of modern slavery conditions in its supply chain.

Aim-listed Boohoo had long been the upstart to the more established Asos, before surpassing it in terms of market cap last year. Today the shares, already dented its shares this week, fell a further 37p or 12% to 260p today. On top of yesterday’s 23% plunge, that meant the company had lost £1.5 billion off its market cap in two days and its value, at £3.27 billion, has slipped marginally below rival Asos at £3.31 billion.

Boohoo’s stock later recovered somewhat, off 19.7p or 6.6% at 277p, valuing it at £3.51 billion. The retailer, which faced an attack by a short seller earlier this year, had seen its stock surge during the crisis as locked-down Brits bought clothes online.

The investor reaction to the slavery allegations, reported in the Sunday Times, underlines the potential damage from the unfolding corporate governance affair.

Yesterday Boohoo said it will investigate alleged illegal practices at a supplier in Leicester after the reports that staff were being paid less than minimum wage – at £3.50 an hour - to work in poor conditions. Home secretary Priti Patel has ordered an investigation into the claims.

The fast-fashion retailer told investors on Monday that it will end relationships with any supplier it finds to have broken its code of conduct.

Umar Kamani, chief executive of Boohoo owned Pretty Little Thing, has posted a brace of cryptic tweets, likely linked to the affair. Yesterday he said: “Don’t believe everything you read” and today he tweeted: “The truth will always come out” before deleting the tweet.

Market analysts at Liberum said of yesterday’s update: "The statement only really speaks of investigating the particular factory in question and raises the question of how many other breaches management is potentially unaware of.

"The rest of the statement speaks of procedures and checks that management has already put in place, which if the allegations are true, have clearly not been robust enough to stop significant breaches happening.

"With an investigation requested by the Home Secretary into the matter, we think Boohoo had an opportunity to show leadership and get ahead of these allegations, and this statement will do little to convince stakeholders.”