* Media report highlights poor working conditions at factory
* Boohoo says thoroughly investigating
* Shares crash over 23%
(Adds detail, analyst comment, updated shares)
LONDON, July 6 (Reuters) - British online fashion retailer
Boohoo will end relationships with any supplier found to have
breached its code of conduct, it said on Monday following a
media report about dire working conditions in one English
factory.
Boohoo shares slumped more than 23% after The Sunday Times
newspaper said workers in a factory in Leicester, central
England, making clothes destined for Boohoo were being paid as
little as 3.50 pounds ($4.38) an hour.
It said the factory, which displayed the sign Jaswal
Fashions, was also operating last week during a local
coronavirus lockdown in Leicester, without additional hygiene or
social distancing measures in place.
On Sunday, Britain's health minister Matt Hancock said he
was worried about factory conditions in the city.
The factory conditions of Asian suppliers of British fast
fashion retailers have been in the spotlight for over a decade
but in recent years a light has also been shone on the
exploitation of low-paid workers in UK factories.
Fast-growing Boohoo, which sells own-brand clothing, shoes
and accessories targeted at 16 to 40-year-olds, is by far the
biggest company on London's AIM market with a capitalisation at
Friday's close of nearly 5 billion pounds. That's more than
double the market value of Marks & Spencer, Britain's
largest clothing retailer by sales value.
"We are grateful to The Sunday Times for highlighting the
conditions at Jaswal Fashions, which, if as observed and
reported by the undercover reporter, are totally unacceptable
and fall woefully short of any standards acceptable in any
workplace," Boohoo said.
It said its early investigations had revealed that Jaswal
Fashions was not a declared supplier and was also no longer
trading as a garment manufacturer, indicating that a different
company was using Jaswal's former premises.
Boohoo said it was trying to establish the identity of this
company.
"We are taking immediate action to thoroughly investigate
how our garments were in their hands, will ensure that our
suppliers immediately cease working with this company, and we
will urgently review our relationship with any suppliers who
have subcontracted work to the manufacturer in question," it
said.
Analysts at Liberum downgraded their investment stance to
"hold" from "buy", saying Boohoo's statement did not go far
enough.
But Peel Hunt analysts noted that consumers have so far
taken little interest in Environmental, Social & Governance
(ESG) issues, whether at Boohoo or elsewhere.
"Investors are increasingly less tolerant, which is more
likely to be a force for change," they said.
($1 = 0.7999 pounds)
(Reporting by James Davey; Editing by Michael Holden, David
Clarke and Emelia Sithole-Matarise)
Marks & Spencer (MKS)