BooHoo shares tumble amid reports of possible US import ban By Investing.com

By Samuel Indyk

Investing.com – Shares in online fashion retailer Boohoo Group PLC (LON:BOOH) fell 7% at the open on Tuesday as the company reportedly faces a US import ban amid allegations of slave labour.

According to Sky News, US Customs and Border Protection has seen enough evidence to launch an investigation after petitions from lawyer Duncan Jepson, who runs the Liberty Shared campaign group.

Modern Slavery Allegations

Allegations that the company and its suppliers use slave labour surfaced last year. An investigation by the Sunday Times found that workers producing clothes for BooHoo in the UK were being paid just £3.50 per hour, less than half the minimum wage for employees over 25.

The reports caused a stir and the company’s share price dipped lower as large fund managers said they were selling their holdings in the company. One of those, Standard Life Aberdeen, announced they had sold the majority of its stake in the company after the allegations were published in July.

Business Impact

A ban on imports by the United States could have large consequences for BooHoo. The company’s sales in the US were £263.6mln last year, accounting for over 20% of the group’s revenue.

“If they do identify this in the supply chain in Leicestershire, the potential sanctions to not trade in the US are enormous,” former UK anti-slavery commissioner Kevin Hyland said.

“The aim of the petitions is very clear, that companies which think they can benefit from forced labour and the exploitation of others are shown that they cannot and will face a sanction that they can’t trade in the world’s largest economy.”

BooHoo response

Responding to the story, BooHoo released a statement to the London Stock Exchange.

“The Group has not received any correspondence from, nor is it aware of any investigation by, US Customs and Border Protection (CBP),” the company said.

“The Group is confident in the actions it is taking to ensure that all of its products meet the CBP criteria on preventing the product of forced labour entering the US (or any of its markets).

“The Group will work with any competent authority to provide assurance that products from its supply chain meet the required standard.”