Boohoo takes £775m hit as auditor stands down
Boohoo saw almost £775m wiped off its market value yesterday after the beleaguered fast fashion retailer said PwC was stepping down as auditor.
Boohoo’s announcement that it was running a tender for a new auditor and that PwC would not take part in the process spooked investors, sending shares down 20 per cent to 254p at market close yesterday.
The share price plummet lowered Boohoo’s market valuation to around £3.2bn, down from almost £4bn the previous day.
Executive chairman Mahmud Kamani today pounced on the falling stock price to snap up shares worth more than £700,000.
Kamani upped his stake in the company in July after buying £10m worth of shares, taking his total holding to just over 12.5 per cent.
PwC’s departure after 7 years as Boohoo’s auditor comes in the wake of allegations of poor factory conditions in the fashion group’s supply chain in Leicester.
Deloitte, KPMG, BDO and Grant Thornton have ruled themselves out of the race to replace PwC, while EY is still in the running.
In a statement, Boohoo said: “The group would like to place on record that PwC is still the group’s auditor at this time.”
“PwC signed an unqualified opinion on the group’s 2020 financial statements,” it added.
While Boohoo did not give a reason for its auditor’s exit, it is understood that PwC planned to resign because of concerns about the risks of working with the company following an inquiry into the firm’s factory conditions.
Boohoo sought to dissolve furore over the allegations by commissioning a review by Alison Levitt QC into working conditions at its suppliers in Leicester, in a highly-anticipated report published last month.
Levitt said “senior members of the Boohoo board knew for a fact that there were some serious examples of unacceptable working conditions and poor treatment of workers” from last December at the latest but “there was insufficient sense of urgency” to remedy the problems.
Boohoo last month reported a huge jump in profit, as the fashion retailer shrugged off the factory allegations by scooping up sales during lockdown.
Revenue for the six months to the end of August rose 45 per cent to £816.5m, following a whopping 83 per cent revenue hike in the US.
Greg Lawless, analyst at Shore Capital said he remained “concerned about where this will all end up with [National Crime Agency] scrutiny, a potential HMRC investigation and vocal MPs in Leicester, who are all now firmly interested in working practices and have Boohoo firmly in their line of sight.
“The change of auditor is not helpful as the reputational headlines are damaging and this poses a challenge for institutional and wealth managers.”