Shares in online fashion retailer Boohoo (BOO:AIM) plunged 12.95% to 274.7p after auditor PwC resigned, reportedly highlighting the reputation risks of continuing to work with the firm.
In a statement, Boohoo confirmed it has launched a tender process for a new auditor, which PwC will not take part in, but pointed out that PwC remains its auditor at this time.
It comes after the news was first reported by the Financial Times, which said PwC was quitting following concerns about continuing to work for the group, having signalled its intention to resign within the last month.
BOOHOO UNDER SCRUTINY
Boohoo has been in the spotlight over a number of ESG concerns in recent weeks, having been accused of allowing abuses of employment law in its supply chain.
The Sunday Times also ran a story that the National Crime Agency (NCA) is investigating suppliers of the company on suspicion of money laundering and VAT fraud. Though there is no suggestion that Boohoo was aware of any illegality.
Executive pay has also been an issue for the company, with a third of shareholders opposing the remuneration report at the company’s last AGM.
One pay plan could hand senior executives up to £50 million each, dependent solely upon its share price performance over the next few years. Boohoo is breaking with the UK corporate governance code and not putting the plan to a shareholder vote.
Shore Capital analyst Greg Lawless said appointing a new auditor perhaps ‘won’t be a walk in the park’ for Boohoo, with potential auditors wanting to ‘understand what has changed/is changing at the company’.
He added: ‘We stand by our view that central overheads will need to rise as the company employs more central resource to sort out the supply chain issues and possibly the culture of the business needs to change too.
‘We continue to highlight that such changes to its working practices may impact the flexibility of its supply chain, thus impacting both its cost base and potential competitiveness.
‘We are also concerned that if influencers, who are an integral part of the company’s marketing mix, turn on the company’s brands then the sales momentum could stutter with the fallout from continued negative and potential damaging headlines.’