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Liberum Capital believes Boohoo’s response doesn’t go far enough as the statement ‘only really speaks of investigating the particular factory in question and raises the question of how many other breaches management is potentially unaware of. The rest of the statement speaks of procedures and checks that management has already put in place, which if the allegations are true, have clearly not been robust enough to stop significant breaches happening.’
The broker added: ‘While we are huge fans of Boohoo’s strategy, with concerns on corporate governance and ethics escalating, the outlook for the shares becomes less certain.’
https://www.sharesmagazine.co.uk/news/shares/boohoo-clobbered-by-leicester-supplier-factory-allegations
Ultimately, the onus is on boohoo to ensure that their materials are ethically sourced by monitoring and auditing the entire supply chain. If this process was done properly, discrepancies in output capacity of the supplier on record would have lead boohoo to conclude that they must be outsourcing. It Is not enough for boohoo to simply take what suppliers tell them without thorough vetting...this is not exactly a new thing and has happened many many times before with other companies, so audits of this nature should be second nature. Proper checks would have weeded out the rogue element so deserved to be punished based on this.
If banks took all mortgage applicants income details at face value without checking, the responsibility of any loss arising from default rightly lies with the bank. The same logic applies here and boohoo failed to realise what was happening. Now you have to ask yourself, is this an isolated incident or is it rife within the boohoo supply chain. Suppliers in this industry get very lazy when they know they are dealing with complacent companies who lack vetting processes, so I would be surprised if this was the only case.
These workers are not Boohoo employees at all. Boohoo don't do their own manufacturing. They contract suppliers to do the manufacturing of clothes for them. These suppliers, in turn, subcontract their Boohoo work to other suppliers. Suppliers must legally tell Boohoo the names and details of any subcontractors. Boohoo stipulate in their contracts to suppliers that the minimum wage must be paid. Suppliers who subcontract have to do this too. Sadly, this is one incident of too much greed by one supplier who subcontracted Boohoo work to an extremely dodgy supplier who used the fake name Jaswal Fashions.
Unfortunately, one of Boohoo's suppliers sub contracted Boohoo work out to an extremely dodgy supplier which used the fake name Jaswal Fashions. Boohoo knew nothing about this subcontract and were never informed of this subcontract at all when Boohoo should have been informed legally of all the details of this subcontract. So, no doubt Boohoo will be terminating their relationship with the supplier who subcontracted Boohoo work out to the extremely dodgy supplier using the fake name Jaswal Fashions.. Boohoo don't do any manufacturing themselves and have never done any manufacturing.
Let me give you a further example of contractor and subcontractor. Fujitsu have loads of contracts with the the UK Civil Service and Fujitsu subcontract their contracts to Capita. This is how business works.
Boohoo contracts suppliers who, in turn, subcontract their contracts with Boohoo to others. All suppliers must legally give Boohoo the names and details of anyone they have subcontracted Boohoo work to. Unfortunately, in this one instance, the contractor behaved illegally and didn't give Boohoo the name and details of the extremely dodgy subcontractor using the fake name Jaswal Fashions nor even tell Boohoo that it had subcontracted this work to another supplier.
Boohoo police all suppliers who have contracts with them and Boohoo also police all subcontracted suppliers too. However, if a contracted supplier doesn't provide the name and details of a subcontracted supplier, then it is impossible for Boohoo to police them.
This is not Boohoo's fault, this is the fault of the supplier that Boohoo contracted to do the work, so no doubt, Boohoo will be terminating the relationship of the supplier who subcontracted the work to the extremely dodgy supplier using the fake name Jaswal Fashions.
I am not sure how people on here can defend boohoo by saying that it is not their fault. The buck ultimately stops with boohoo as it is their responsibility to ensure all materials are sourced from ethical and legal sources by regularly vetting and auditing all supply chains. Clearly boohoo foster a culture of see all say nothing and create an environment where this sort of behaviour is inevitable all in the name of being cheap and in volume. Is this the tip of the iceberg? I am willing to bet that this is not an isolated incident, and I am sure many spectators will be digging for more dirt like flies on shlte, and then you have the whistleblowers coming out of the woodwork.
Companies have been ruined over incidents like this, and are punished by the market harshly and deserve to be. Then you have a market made primarily of increasingly leftist millenials who are very aware of such issues and much more socially responsible than generations gone by and may decide to boycott boohoo.
To say that this is serious is an understatement. A failure of epic proportions by the company by failing to pick up on this and a PR nightmare that will be tough to come back from. Expect more pain in the coming days