Boohoo is down a massive 28% from its 2020 highs after a media report exposed gross violations of UK work rules at various suppliers of its productions. A report by the Sunday Times showed that another Boohoo brand, Nasty Gal, was paying its workers as little as £3.50 an hour, far less than the minimum wage. Another labour rights group had earlier reported that suppliers of Boohoo’s products were violating social distancing guidelines and were forcing workers who were furloughed to come to work, which is another breach of UK government rules.
Boohoo attempted to walk back on its association with the situation, saying that Jaswal Fashions, the supplier mentioned in the illegal wages scandal, was “not a declared supplier” and that the company was also “no longer trading as a garment manufacturer.” Boohoo praised the report of the Sunday Times, which showed what Boohoo said were “totally unacceptable” working conditions at the concerned supplier locations.
Poor working conditions and illegal wages have become labour issues of great concern in the UK’s garment industry.
Boohoo’s latest woes add to the concerns of analysts who had wondered if Boohoo could sustain its sharp business growth once lockdowns were eased. Boohoo’s surge in sales of casual wear and home clothing coincided with a period when millions of workers were laid off, furloughed or forced to work from home at the height of the coronavirus pandemic in March and April 2020.
After hitting its all-time high of 433.5 pounds on 17 June, Boohoo share price began a pullback which has cascaded into a massive selloff on the back of the Sunday Times report of yesterday. The stock is down 26.3% on the day and presently trades at 275.6 as at the time of writing.
This price slump is now challenging the support at 283.2, where previous lows of 23 December 2019 and 28 February 2029 are located. A breakdown of this support opens the door for the price to aim for the immediate downside target at 262.7 (12 December 2019, 10 March and 21 April 2020 lows). Below this level, 242.3 and 216.7 form the other immediate downside targets if the price decline continues.
