Shares of fast-fashion company Boohoo Group PLC (LON: BOO) are down 8.89% in 2021 despite recently announcing stellar full-year 2020 results boosted by the coronavirus pandemic lockdowns that hit physical retailers such as Debenhams.
The company has struggled to rebuild its brand image and reputation after the Sunday Times investigation unveiled deplorable working conditions and poor pay at one of its suppliers’ factories in Leicester, triggering a significant public outcry in July 2020.
Boohoo has struggled to rebuild its reputation since news first reached the public, including hiring famous British lawyer Alison Levitt QC to conduct an independent review of its UK supply chain.
The fashion company then recruited Sir Brian Leveson, who led the UK media phone-hacking inquiry, to implement Levitt’s recommendations. Yet, the scandal continues to affect the company’s share price negatively.
Boohoo unveiled a new list of 77 UK suppliers after ditching over 300 other suppliers to improve the oversight on its supply chain to ensure that the workers who make its clothes work in decent conditions and are fairly compensated.
Still, the gloomy clouds of deplorable working conditions are hanging over the company despite its best efforts. This all comes down to Boohoo’s business model, which seems to be the real bone of contention.
The fast fashion industry is solely driven by the manufacture and sale of fashion items at low prices, which leaves the company little wiggle room in pricing its products and raising its workers’ wages.
The environmental impact of the fast fashion industry is also a significant issue, given that most items made by the industry are meant to be worn very few times before being discarded. Conservation groups have raised awareness of fast fashion’s impact on the environment, whose main appeal is low-priced trendy fashion items.
Boohoo is caught between a rock and a hard place for now, but the market for its products is quite huge given the low prices compared to other fashion brands that have higher-priced items.
From a technical perspective, Boohoo’s shares are likely to break below the 300p level and head lower to the 255p. A bullish move from here invalidates the bearish outlook and brings the 330p resistance level into focus.
Boohoo share price.
Boohoo shares are down 8.87% in 20201 and are likely to fall further if they break below the 300p level.
Should you invest in Boohoo shares?
Boohoo shares are traded on the London stock exchange's AIM market (the alternative investment market), which is the submarket specifically for smaller companies. AIM stocks are attractive to investors as they have tax advantages and smaller companies have the potential to benefit from rapid growth. But are Boohoo shares the best buy? Our stock market analysts regularly review the market and share their picks for high growth companies