Last night, the BBC aired an episode of Panorama that was focused on online fashion retailer boohoo (LON:BOO). The programme didn’t exactly paint boohoo in a positive light. Nevertheless, the boohoo share price is up today. As I write this, it’s up more than 3%. So, what’s going on here?
BBC’s investigation into boohoo
In the BBC Panorama investigation, undercover reporter Emma Lowther took an admin assistant’s job at boohoo’s headquarters in Manchester.
Her goal was to find out if boohoo has cleaned up its act in recent years (the online retailer came under fire in 2020 for poor working conditions and promised to overhaul the way it does business with an ‘Agenda for Change’ programme).
Now, the BBC’s investigation found that boohoo has recently been putting pressure on suppliers to drive its wholesale prices down. Sometimes, the company has demanded price cuts for orders that have already been made and are ready for delivery.
As a result of the investigation, the company has been accused of breaking its promises to treat suppliers and workers fairly.
Why is the boohoo share price rising?
So, why is the boohoo share price up today then?
Well, it could be due to the fact that boohoo has defended its treatment of suppliers.
“Like all businesses, we have experienced significant cost inflation over the last year, which we have absorbed in order to maintain affordable prices for customers,” a spokesperson for boohoo said in a statement.
“As the cost of raw materials, freight, and energy started to come down, the group asked its suppliers to reflect this in their pricing through discounts of between 1 and 10%, and we passed the savings onto customers,” the spokesperson added.
It could also be down to the fact that the company says that it’s taking its responsibilities seriously.
“Boohoo has not shied away from dealing with the problems of the past and we have invested significant time, effort and resources into driving positive change across every aspect of our business and supply chain,” the spokesperson said.
Of course, it could just be improved sentiment towards small-cap shares that is helping the share price today.
Alternatively, the rise could have something to do with the fact that Mike Ashley has been buying boohoo shares recently.
In recent months, the billionaire has been snapping up a lot of boohoo stock via his company Frasers Group (which owns Sports Direct, House of Fraser, Evans Cycles, Flannels, Jack Wills, and more).
And in late October, a regulatory filing revealed that Frasers now owns 16.5% of boohoo shares.
This suggests that the FTSE 100 retail group could be looking to buy boohoo. If a bid was to materialise, it would most likely be at a premium to the current share price.
Share price outlook
As for where the boohoo share price is likely to go in the near term, it’s hard to know.
This is a company that is facing a lot of challenges right now. Not only does it have to navigate a consumer spending slowdown, but it also has to compete with Chinese online fashion powerhouse Shein (which sells clothes at rock-bottom prices).
However, the share price has come down a long way in recent years and as a result the company’s market cap is just £420 million today. That’s low given that the group is forecast to generate sales of £1.6 billion this financial year.
If the company can get its act together and return to growth (and profitability), I think there could be further share price upside here.
Edward Sheldon owns shares in boohoo
Based in London, Edward is a distinguished investment writer with an extensive client portfolio comprising a diverse array of prominent financial services firms across the globe. With over 15 years of hands-on experience in private wealth management and institutional asset management, both in the UK and Australia, he possesses a profound understanding of the finance industry.
Before establishing himself as a writer, Edward earned a Commerce degree from the prestigious University of Melbourne. Complementing his academic background, he holds the esteemed Investment Management Certificate (IMC) and is a proud holder of the Chartered Financial Analyst (CFA) qualification.
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