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Wednesday, December 2, 2020

Profits Rise For Boohoo In Spite Of Working Conditions

A review of Boohoo’s supply network conducted just last week found serious failings. In response, Boohoo has said that it was undergoing “substantive, long-lasting and meaningful change,” to better working conditions and pay for its lowest earning employees, specifically those involved in the production of clothing. The investigation came after fears that employees in its factories were being exploited during the lockdown–including those in a factory in Leicester. The company asked Alison Levitt, a barrister, to carry out the review–her findings included a lack of compensation amongst workers for their efforts and a lack of general awareness of rights and duties. Her report stated that the company had “capitalised on the commercial opportunities offered by lockdown,” but was failing to take into account the repercussions on those most vulnerable, namely those fashioning the clothes that were being sold. Controversially, it also highlighted the fact that upper management were aware of these “serious issues” regarding the mistreatment of workers. 

Nonetheless, Richard Hunter, head of markets at Interactive Investor, maintains that any potential “reputational damage caused by the allegations” is not showing in profits, reiterating that there is no evidence that the controversy has “filtered through to a very strong set of numbers.” He added that for now, a period of “stellar growth continues for Boohoo, as does a share price which fully recouped the declines of July to stand up 31% in the year to date and ahead by 48% over the last year.” In spite of the scandal, Boohoo has raised its predicted income for the following year, as reported in an interim results statement. It has said that “group revenue growth for the year to 28 February 2021 is expected to be 28-32% up from approximately 25%.” Profits before tax shot up from £45.2 million last year to £68.1 million in the six months leading up to August 31st. In those six months, the retailing giant added Oasis, Pretty Little Thing and Warehouse to it’s list of brands, which helped generate additional revenue, whilst the number of active shoppers skyrocketed by 34%, with the store seeing an “exceptional increase” in the lockdown months. Still, the company said that it would be “prudent to continue to plan for a period of economic uncertainty in the second half of the financial year, including possible reduced customer spending. It is also prudent to plan for return rates returning  to normal.”

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