Boohoo bounces back as City rallies round online retailer
Beleaguered Boohoo, the under fire Manchester online fashion retailer, saw its stock rally today (July 9) after a torrid time on the markets this week.
It followed weekend reports by the Sunday Times linking it to a Leicester clothing factory allegedly paying a pittance in wages and flouting lockdown rules.
Earlier this week the group had seen its value tumble by £1.59bn, with its shares closing at 224.50p per share on Wednesday evening.
That was fuelled by news of retailers, including Next and Asos, removing Boohoo brands from their websites.
However, since the group responded with a strong rebuttal of the allegations and its own investigation into its supply chain procedures, the City rallied round the stock in early trading this morning that saw its share price soar more than 30% shortly before mid-day, before closing at 286.10p per share, a 27.44% improvement on the previous day, and restoring the group’s value to £3.60bn.
Traders seemed willing to forgive the brand, with brokers at Peel Hunt saying: “Fundamentally, we see the share price fall as a buying opportunity, accepting that ESG (Environmental, Social, and Governance) remains a work in progress for Boohoo.”
One of its main investors accepted that, while it was “fully aware” of recent concerns and said it would be raising them with Boohoo bosses, added: “This kind of supply chain issue is not new and one we have identified and discussed as a significant business risk for Boohoo and many other retailers in the fast-fashion industry.”
But there still remains a suspicion that this could be more than just a blip for the Manchester disruptor.
Russ Mould, investment director at Manchester investment platform AJ Bell, warned: “The tide is turning for Boohoo. A growing army of people are sharpening their knives.
“Undertaking a thorough review of its supply chain should have been done a long time ago as allegations about poor supplier working practices date back to 2017.
“Boohoo looks like a classic case study in the making for poor ESG practices given the supplier and wage controversy, its actions in buying companies from connected parties and the very large incentive plans for directors.”
And, even while traders were piling back into Boohoo’s stock today, brokers at Shore Capital were still urging investors to sell, saying: “The company has to deliver the outcome of its own investigations and it faces the potential of external enquiries too, including a possible police investigation.
“Until the outcomes are better understood, the stock feels less than appetising for many investors and may be totally off limits for many ESG funds for now.
“This may, in time, prove to be a short-term blip and so no damage to brand equity, or it could be a Gerald Ratner moment.”