- Independent review launched: Boohoo Group plc (LON:BOO) has announced the launch of an immediate independent review of its UK supply chain, intended to identify any areas of risk and non-compliance and to further strengthen the Group’s compliance procedures to ensure similar allegations will not recur in the future. The review is to be led by Alison Levitt QC, a highly experienced advocate who has previously reported on complex issues, including safeguarding enquiries. Boohoo has also announced an initial additional £10m investment in ensuring any supply chain malpractice is eradicated and is accelerating its independent third-party supply chain review with ethical audit and compliance specialists Verismo and Bureau Veritas.
- Findings to date: To date the Group has found no evidence to support claims of suppliers paying workers £3.50 per hour. Evidence of non-compliance with the Group’s Code of Conduct relating to record keeping has resulted in the immediate termination of relationship with both the suppliers in question, Revolution Clothing Co Limited and Morefray Limited with the Group stressing it will not hesitate to terminate relationships where non-compliance with the Group’s Code of Conduct is found.
- Commitment to UK manufacturing: The Group has reaffirmed its commitment to UK manufacturing, which currently produces c.40% of the Group’s products. Producing products in the UK does not create a cost advantage for the Group, its strength lies in its proximity to UK distribution centres which allows for maximum flexibility to react to the latest trends. The Group is committed to supporting thousands of UK jobs that may otherwise be lost to overseas markets, and has industry leading 14-day payment terms for its UK suppliers to ensure they have reliable and consistent cash flows to responsibly carry out their business.
- Wholesale: The Group’s wholesale business is a relatively small part of its overall operations, contributing just 1.4% of Group turnover in the first four months of the current financial year with the Group having ceased trading with Amazon several years ago. Wholesale revenues generate a lower margin contribution versus retail and as such we believe represent <1.4% of Group profitability YTD.
- Board composition & Governance: The Group is currently in the process of strengthening its PLC board through the appointment of two additional NEDs with a focus on candidates with experience in dealing with ESG matters.
Zeus Capital believe today’s announcement affirms Boohoo Group’s clear commitment to the highest standards of ethics, compliance and transparency. The Group has the operating flexibility and resources to take swift and comprehensive action to address concerns raised. Trading on a FY21 PE of 28.4x we believe the shares currently present an opportunity for investors able to support the Group’s ongoing progress in developing and strengthening its ESG profile.
