Investor offloads Boohoo stake as links with Kamani family and Leicester factory uncovered

Boohoo

Boohoo’s share price recovered from a dramatic drop this morning following allegations of mistreatment of staff at a Leicester garment factory with a number of investors saying they had confidence in the etailer’s response.

Analysts at Société Générale, HSBC, Goldman Sachs and Peel Hunt also retained their “buy” status on the stock with SocGen saying it was satisfied that the allegations related to an “isolated” incident. This resulted in a pick-up in its share price to around 280p from a low of around 225p.

However the Financial Times has reported this afternoon that one of Boohoo’s biggest investors Standard Life Aberdeen has dumped all of its stock saying the fashion fashion group’s response to the allegations was “inadequate in scope, timeliness and gravity”.

A story emerged in The Sunday Times at the weekend saying that an under cover reporter had seen clothes destined for Boohoo and its subsidiary Nasty Gal at a factory, which has Jaswal Fashions signs outside, where workers were paid just £3.50 an hour.

Boohoo responded to the claims by saying that Jaswal Fashions no longer operated from the building and it was trying to identify the company operating there. It also said that the clothes seen by the reporter had been made in Morocco and were sent to the factory by one of its suppliers for repackaging.

The fashion group confirmed to The Guardian that the company operating from the building was, in fact, Morefray Ltd. The newspaper has looked into Morefray and discovered links with Boohoo founder and chairman Mahmud Kamani’s brother, Jalal Kamani, and the factory.

Jalal Kamani had been a co-founder in Boohoo but left and went on to set up another fast fashion brand called, I Saw it First in 2017. This brand has no formal connection to Boohoo and is a separate entity.

The Guardian has revealed that Morefray is 50%-owned by a Manchester-based firm called I5 Holdings, which is in turn owned by Shahzad Irshad, a director of I Saw It First. Irshad took control of I5 Holdings from Zogan Limited, a company that shares three current or former directors with I Saw It First. Irshad and Jamal Kamani are co-directors of several other companies.

Boohoo told the newspaper that Mahmud Kamani had no personal connection to Morefray Ltd and that Boohoo investigators were visiting the site. It said it had not previously heard of any under payment of staff at the facility before the media reports. The Gangmasters and Labour Abuse Authority also said it had not found evidence of modern slavery at the Leicester factories.

Boohoo has appointed leading lawyer, Alison Levitt QC, to conduct and independent investigation of its supply chain.