Shares in online fast fashion retailer Boohoo (BOO:AIM) fell 4% to 330p after reports emerged that it could face a US import ban over widespread allegations of slave labour.
According to Sky News, US Customs and Border Protection has seen enough evidence to launch an investigation after petitions from a campaigning British lawyer.
Duncan Jepson who runs Liberty Shared, a campaign group against modern-day slavery, has claimed Boohoo is not doing enough to stop forced labour in the Leicester factories which make many of its clothes.
The US is an important market for Boohoo, set to account for 25% of its full year 2021 revenues according to analysts at Numis.
In response to the press reports, Boohoo said it’s not aware of any investigation from US Customs and Border Protection and insisted it is confident in the action it’s taking to ensure all its products meet the criteria on preventing the product of forced labour entering the US.
Boohoo said, ‘Over the past 8 months the group has been working closely with UK enforcement bodies. If the group were to discover any suggestion of modern day slavery it would immediately disclose this to the relevant authorities.’
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Boohoo has been in the spotlight over a number of ESG concerns in recent months, having been accused of allowing abuses of employment law in its supply chain.
AJ Bell financial analyst Danni Hewson said these new allegations will ‘hurt the reputation’ of the business still trying to ‘regain its sparkle after an investigation into its UK suppliers left it with a long to do list.’
She said, ‘It comes at a particularly crucial time. Our lockdown shopping habits helped sales rocket by 40% last year but the company will be concerned that growth might not be sustainable, particularly when you consider how the spending power of 16-25 year olds has been affected by the pandemic.’
Boohoo has been looking to broaden its customer base with the £55 million acquisition of Debenhams and several of Arcadia brands, and Hewson said investors will be keeping a close eye on how quickly Boohoo can ‘put this issue to bed once and for all.’
She added, ‘Today’s consumer isn’t just looking for a bargain. They are looking to buy into a lifestyle and social responsibility is part of that.’
