What next for Boohoo - SwiftERM

What next for Boohoo. Boohoo has had a more eventful pandemic than most. From booming sales to allegations of modern slavery to buying up household brands Debenhams, Dorothy Perkins and Burton, the Manchester-based firm has not been far from the headlines for the past 12 months.

But what will this period all mean for the future of the fast fashion firm, which has grown so rapidly since being founded in 2006 by entrepreneurs Carol Kane and Mahmud Kamani?

It would be unfair to suggest Boohoo’s success has come about solely due to the coronavirus pandemic shutting shops and forcing people to buy online from their homes. Launched in 2006, the pair of entrepreneurs who previously worked as suppliers to other chains, spotted an opportunity to sell clothes online to the masses under an innovative ‘fashion for all’ banner.

In just over a decade, Boohoo had been transformed into a multimillion-pound success story, listing on the London Stock Exchange in 2014 after selling a £240m stake in its website.

The listing was followed by a number of acquisitions of businesses including Pretty Little Thing, MissPap and Nasty Gal, with the firm quick to take advantage of the emerging impact of social media influencers. So when the pandemic hit last year, Boohoo, a rapidly-growing online fashion business, was better placed than almost any other to capitalise. And with the constant flow of ‘stay at home’ orders issued under local and national lockdowns that have still not subsided to this day, it has certainly done just that.

Boohoo reported at the start of this year that pandemic revenues had increased by 42% over the 10 months to the end of 2020, with particularly strong growth in the US. The total figure stood at £1.47bn. Sales over the last four months of 2020 were up 40%, and the company said it expected revenue growth for its current year to be around 36%, ahead of previous guidance. That 40% compared to rival Asos’ reported 23% increase in sales over a similar period.

Speaking at the time, CEO John Lyttle said he was “delighted” with the group’s performance over the peak trading period. He said: “Our team worked exceptionally hard in 2020 as we navigated the many challenges. “Growth has been strong across our multi-brand platform and we have continued to grow our market share across all geographies.”

Concerning allegations

Despite the successes, Boohoo’s rapid growth has been overshadowed over the past year by allegations of poor working practices at some of its suppliers in Leicester and abroad.

It took something of a battering last summer after the Sunday Times sent an undercover reporter into a Leicester factory making clothes destined for its websites, which he said was paying workers £3.50 an hour – well below the minimum wage. Shares in the firm at the time fell by around 40%. An independent review of the claims found that although Boohoo did not intentionally profit from the poor working practices, the firm’s monitoring of some suppliers was ‘inadequate”.

It was headed by senior lawyer Alison Levitt QC. Her findings said the fast fashion chain knew about “serious issues” with the treatment of factory workers in Leicester in December 2019, but failed to move quickly enough to do anything about it. She also said Boohoo “capitalised” on the commercial opportunities offered by lockdown – as online sales rocketed – supporting Leicester factories by not cancelling orders, but taking no responsibility for the impact on the people on the shop floor.

And she blamed “weak corporate governance” for the company’s inadequate monitoring of its Leicester supply chain. That report led to the company’s Agenda for Change programme, which is focused on raising standards in its supply chains and supporting workers’ rights in Leicester, among other matters. A report by former High Court judge Sir Brian Leveson said that Boohoo was making progress in those areas but noted that it was a “work in progress”.

In December, Boohoo said it had cut ties with more than 60 of its suppliers in Leicester over concerns staff were being underpaid and overworked in poor conditions. In February, the firm said it had begun telling UK suppliers to stop sub-contracting to smaller firms which might be exploiting workers. It told all its Leicester suppliers to bring all manufacturing in-house in order to ensure better accountability for the complete supply chain.

And in March, the company spoke out to deny that it was aware of any investigation despite “recent media commentary” it faced a possible US import ban due to the allegations.

Sweeping up

January came around, when Boohoo announced the acquisition of the collapsing Debenhams department store chain – but the £55m deal meant the closure of the famous brand’s 118 shops, with thousands of jobs lost. It’s thought the acquisition of the brand will allow Boohoo, which specialises in fashion for younger people, to add new customers, as well as moving into areas such as beauty, sport and homeware.

Debenhams’ own fashion brands will also be absorbed into Boohoo’s current portfolio and sold via the Debenhams website. Boohoo will benefit from Debenhams’ database of millions of shoppers, as well as partnerships with brands it currently does not have. Just days later, Boohoo was at it again – this time completing a £25m deal for Dorothy Perkins, Wallis and Burton brands from Sir Philip Green’s failed Arcadia empire.

The Manchester firm said that it would buy all the e-commerce and digital assets of the three brands, as well as their inventory, though the deal did not include the brands’ retail stores, concessions or franchises.That string of announcements of course followed on from the chain’s acquisition of Oasis and Warehouse early in the pandemic in June 2020 – for £5.25m

So what’s next?

So, where next for Boohoo? Will their astounding success continue, despite the imminent reopening of non-essential retail?

The answer is yes, according to retail expert Professor Kim Cassidy, from Edge Hill University’s Business School, said: “Boohoo will continue to be successful as their core customers are brand loyal and were committed online fashion shoppers before the pandemic.

“They are used to the rules of the ‘online game’, and will not switch back to physical stores once they are open as they have moved away from the physical channel long ago.

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