Inspections at factories in Boohoo’s UK supply chain have highlighted concerns over a lack of “adequate Covid governance in place”, as the fast-fashion retailer ramps up production to meet soaring demand.
Boohoo was rocked last year by evidence of widespread labour abuse among its UK suppliers, including illegally low pay and dangerous working conditions.
It has since scrambled to reassure investors that it is striving to improve conditions within its factories. In November, the company appointed Brian Leveson, best known as the judge who oversaw the inquiry into Britain’s phone-hacking scandal, as well as auditor KPMG, to monitor an overhaul of its supply chain and sourcing practices.
Sales at the online retailer have surged during the pandemic, with it benefiting from the forced closure of physical stores during pandemic lockdowns. On Thursday, Boohoo raised its full-year revenue growth forecast to 36-38 per cent, up from previous guidance of 28-32 per cent.
It also published Sir Brian’s first report to Boohoo’s board, which stated that Bureau Veritas, one of the retailer’s two new supply chain auditors, had “so far” shared reviews of 13 manufacturers that showed “not one of them has adequate Covid governance in place”.
Boohoo was last year criticised for ramping up UK production in the midst of the pandemic as it sought to meet surging demand. An independent review into its supply chain at the time found that “at no point was any assessment made as to how the Leicester workforce was to cope with the increased volume of orders”.
John Lyttle, Boohoo’s chief executive, on Thursday told the Financial Times that the company’s second auditor, Verisio, had inspected “a good number more” factories than Bureau Veritas but declined to say what those audits had shown.
He added that any non-compliance with social distancing and coronavirus hygiene rules identified by the auditors had been addressed.
Sir Brian’s report said that Bureau Veritas’s audits had focused “mainly on suppliers and subcontractors outside Leicester”, the UK’s garment manufacturing hub, and that compliance scores awarded had ranged from 16 to 98 per cent.
Boohoo’s share price, which has nearly recovered from its collapse last year after the scandal, was down more than 3 per cent on Thursday.
Analysts at Investec said the company’s planned shake-up of its supply chain could cause potential “disruption”. They added that “as long as no more than 10 per cent of Boohoo’s UK-sold items are linked to unethical sources, the higher cost required to source such items ethically would be unlikely to impact margins by more than 100 basis points”.
Boohoo sources roughly 40 per cent of its clothes in the UK, where labour abuse has become widespread and instances of fraud have been reported.
The company has previously committed to improving factory conditions in the UK rather than move all production to Asia. Mr Lyttle said on Thursday that the UK would with time come to host a smaller share of its production.
“We will be consolidating [the number of factories we work with] in the UK but we will be increasing [production] overseas as we grow our business,” he said.
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