Boohoo Withholds Supplier Payments Due to Quality Issues

Boohoo Group’s not happy with some of its suppliers.

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The fast fashion e-tailer is alleging that some are producing subpar goods, and Boohoo is withholding payments until they make good on the orders.

“Boohoo Group is committed to delivering product of the highest quality to its customers. We are currently talking with a very small number of supplier partners where, unfortunately, the product supplied was not of a high enough standard,” the e-tailer said in a statement to Sourcing Journal. “We are working collaboratively with them to remedy the situation and ensure this does not happen again.”

Boohoo has seen sales slow as consumers pull back due to inflationary pressures. Some of the pullback is also due to intense competition from Chinese e-tail rivals Shein and Temu. And Shein is looking to gain an even deeper foothold in the U.K. It had planned on a U.S. initial public offering, but met roadblocks from congressional leaders and has since shifted its IPO focus to a flotation on the London Stock Exchange. Shein has tapped former EU budget executive Günther Oettinger to help it with its pre-IPO lobbying effort.

For Boohoo executive chairman Mahmud Kamani, both Shein and the alleged supplier problem are just the latest additions to a long list of challenges he faces in a turnaround of the company’s fortunes.

In June, nearly 50 Boohoo investors filed claims seeking more than 100 million pounds ($127 million) in damages connected to alleged labor rights violations at its supplier factories in Leicester that, once public, caused the e-tailer’s share price to collapse.

Boohoo is also working with advisors to help with lender talks regarding a refinancing of the company’s 325 million pound ($422.2 million) revolving credit facility. It already secured a one-year extension on 250 million pounds ($324.8 million) that’s now due in 2026, but a sticking point remains the 75 million pounds ($97.4 million) that’s still due in March 2025. Boohoo reportedly in February had borrowed the entire amount.

Meanwhile, Boohoo is set to unveil a new online marketplace on Aug. 31 called Boohoo Brands . The platform will feature at least 150 brands across fashion, accessories, and beauty. And to drum up lagging sales globally, the e-tailer has already integrated thousands of social media influencers onto its website through a social commerce initiative called Boohoo Collective. These influencers also share discount codes on their shoppable TikTok and Instagram pages to earn commissions.

The Telegraph, which first reported on the withholding of payments, noted that it was part of a three-month program at Boohoo to improve product quality.

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In Boohoo’s annual report filed in May for the year ended Feb. 29, 2024, Kamani said the company in the back half of the year conducted a “thorough examination of our business operations, assessing operational workflows and cost structures.” He said the company’s board implemented a series of initiatives following the review. He also noted that U.K. fulfillment was moved to the Sheffield and Burnley distribution centers to “fully utilize their automation capacity,” and that operations at Daventry and Wellingborough have been shut down.

The first-half focus was on streamlining its core brand portfolio down to five from 13. And the company moved forward on its Debenhams plan to turn it into a digital department store, including the expansion of the marketplace platform to offer over 10,000 brands by the end of 2024.

Kamani said the company’s medium term EBITDA (earnings before interest, taxes, depreciation and amortization) margin target of 6 percent to 8 percent remained unchanged.

“By focusing on cost management and profi table growth, we have established a robust foundation for future sustainable growth and cash generation,” Kamani said. “This gives me confidence that boohoo will emerge from the worst of this disruption as a continued leader of the global fashion industry.” He described Boohoo as a “fantastic business,” and expressed confidence in his team’s “ability to deliver strong financial performance in the next ten-year phase of our journey.”

For the year ended Feb. 29, the company posted a wider net loss before tax of 159.9 million pounds ($1.48 billion) versus a net loss before tax of 90.7 million pounds a year ago ($84.7 million). Revenue fell 17 percent to 1.46 billion pounds ($1.35 billion) from 1.77 billion pounds ($1.65 billion) over the same time period.

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