MARKET REPORT: More tears for Boohoo backers as crisis grows after fashion company suspends orders with some suppliers
Boohoo investors were given another kicking after the company admitted it had suspended orders with a number of suppliers over sweatshop allegations.
Shares in the group sank by as much as 17 per cent in afternoon trading after the reports were published.
An investigation found the fast fashion retailer, which is one of the biggest companies on AIM, was selling clothes made by at least 18 factories in Leicester that may have been paying workers less than the minimum wage.
Boohoo has been rocked by claims its clothes were being packaged in sweatshop conditions
Boohoo is thought to account for up to 80 per cent of the output from the city’s 1,000 factories.
Third-party audits of the suppliers failed to confirm what they were paying workers – and in some cases it appeared they were making as little as £3 or £4 an hour.
In response to the findings, made by the Guardian, Boohoo said it had drawn similar conclusions about an unspecified number of suppliers and had suspended business with them.
The online retailer, which also owns American clothes brand Nasty Gal, has been rocked by claims first made in July its clothes were being packaged in sweatshop conditions.
The crisis undid an astonishing rally in its share price since the pandemic took hold – when online retailers virtually across the board excelled – and sent investors including Standard Life Aberdeen packing.
It is still in the process of putting together its own independent investigation, led by top business barrister Alison Levitt QC, and has said it cannot comment further until that is completed.
The latest development in the sorry saga sent Boohoo shares down 9.3 per cent, or 29.8p, to 289.5p by the close.
Investors in Lloyds Banking Group were undeterred that the bigwigs at Mayfair hedge fund Marshall Wace have made the biggest bet against the lender’s shares on record.
The fund has built up a 0.51 per cent short position – worth around £100million – and will make money if Lloyds’ share price falls.
Lloyds’ stock was up 0.5 per cent, or 0.15p, to 28.35p last night.
The move by Marshall Wace indicates that people in the City think banks are set to suffer even more in the coming months, despite having a terrible first half that saw them put billions on one side for bad loans.
Marshall Wace has also got short positions on a number of other firms hit hard by the pandemic, including Tui (whose shares dropped 1.5 per cent, or 5p, to 329.7p last night), Rightmove (up 0.2 per cent, or 1p, to 633.8p) and ailing shopping centre owner Hammerson (up 0.3 per cent, or 0.13p, to 48.43p).
Hedge fund Marshall Wace have made the biggest bet against Lloyd’s shares on record
It was a mixed day for London’s biggest indexes, which were thin on corporate news.
The FTSE 100 dropped by 0.61 per cent, or 36.42 points, to 5963.57, while the FTSE 250 rose 0.15 per cent, or 26.3 points, to 17788.33.
The mid-cap index was pushed higher by Russian gold miner Petropavlovsk, whose shares rose 9.2 per cent, or 3.1p, to 36.65p. The group has been embroiled in a very bitter – and very public – spat between investors and management. The investors won, and have now named Maxim Meshcheryakov as interim chief executive.
Struggling cruise company Carnival was given a boost as it announced a number of its German cruises will resume later this year. The first will be a seven-day voyage to the Canary Islands.
Shares in the group rose 3.5 per cent, or 35.5p, to 1054.5p after weeks of announcements of pushbacks and cancellations.
Greggs, on the other hand, moved into the red, falling 1.6 per cent, or 23p, to 1417p after it was forced to close its distribution centre in Leeds for a deep clean after a Covid-19 outbreak. An undisclosed number of staff there have tested positive for the illness.