Boohoo, the prominent online retail giant, is currently experiencing a continuous slide in its shares following the recent garment factory scandal. On Monday alone, the company witnessed a drastic 18% drop in its shares, and as of Tuesday, there was an additional 6% decline. At present, Boohoo shares are trading at approximately 217p each, a substantial decrease from the 415p per share they reached just a month ago. Consequently, the company’s valuation stands at £2.74 billion, falling far short of the £7.55 billion target required to activate its senior management incentive plan within three years.

The plummeting share prices can be attributed to shocking revelations regarding Boohoo’s supply chain. It was disclosed that the company had been utilizing factories in Leicester that paid their workers well below the minimum wage and failed to implement appropriate social distancing measures. Although Boohoo did not directly employ these factories, as they acted as subcontractors for other manufacturers, the lack of awareness and responsibility in addressing these issues has understandably tarnished the company’s reputation.

It is worth noting that Quiz, another fashion retailer, has also been implicated in these revelations. Furthermore, there are expectations that more companies will face negative scrutiny concerning their supply chains. The initial negative public relations began just over a week ago, and the recent decline in Boohoo’s share price is a direct consequence of additional reports highlighting issues within Leicester factories, which supply a significant portion of its stock.

Financial analysts predict that Boohoo’s growth rate in the UK could potentially decrease by half due to the negative publicity, and the company may have to incur an additional cost of £20 million to strengthen its supply chain. Many analysts argue that Boohoo’s commitment to investigating and implementing changes is insufficient to overcome the scandal. However, the long-term repercussions on Boohoo’s reputation remain uncertain. While there is a possibility that the company’s UK growth rate may slow, it could also bounce back quickly. Moreover, Boohoo’s growth in international markets is not expected to be significantly affected.

It is essential to highlight that Primark, another major retailer, has also faced accusations of poor working conditions within its supply chain. Nonetheless, the company has taken measures to enhance transparency and has seen gradual recovery in its reputation. This week, Primark’s parent company was applauded by the UK Treasury for refusing further government assistance, and the chain’s sales are displaying signs of improvement.

In conclusion, Boohoo’s shares are continuing on a downward trajectory due to the garment factory scandal. The company’s value has suffered a significant decline, and it faces considerable challenges in rebuilding its reputation and strengthening its supply chain. While the ultimate impact remains uncertain, it is evident that Boohoo must take decisive action to regain trust and ensure ethical practices throughout its operations.

Useful links:
1. BBC – Boohoo: ‘Nowhere left to hide’ for company behind scandal
2. The Guardian – Boohoo rocked by scandal