Boohoo, the struggling fast-fashion retailer, has found itself in a standoff with its suppliers after withholding payments due to claims of subpar clothing quality. The online budget specialist has allegedly targeted manufacturers responsible for producing a high proportion of faulty goods, refusing to pay them until the issues are resolved. According to a source close to Boohoo, the decision to withhold payments is part of a three-month programme aimed at improving quality following a significant increase in faulty goods delivered by a small group of suppliers.
The source claimed that these suppliers were involved in “very high levels of faulty goods” and that Boohoo was “contractually entitled” to withhold money. This episode adds to the numerous challenges facing executive chairman Mahmud Kamani as he navigates poor trading, intense competition from China, and a share price that has plummeted more than 90% from its pandemic peaks. In May, Boohoo announced that annual losses had widened to £160m from £90m the previous year, with turnover plunging 17% to £1.5bn.
Analysts have highlighted the retailer’s rate of returns as one of its many troubles, although it fell slightly in its most recent results. Boohoo also faces crucial debt negotiations in the coming months as it attempts to persuade lenders to refinance more than £300m of existing loans. Both Boohoo and its creditors have hired specialist debt advisers to oversee the discussions, a move that analysts at Shore Capital described as “concerning.”
The company has a £325m unsecured overdraft, which it has fully drawn down and must repay in two instalments over the next 18 months. Of that, £75m must be repaid next year after banks refused Boohoo’s request for an extension, with the remaining £250m due in 2026. The current supplier disagreement is believed to involve around 10 clothing manufacturers out of an estimated 500 worldwide. Most of Boohoo’s suppliers are based in China, but it works with at least 40 factories in the UK, primarily located in Leicester.
A spokesman for Boohoo stated that the company is committed to delivering high-quality products to its customers and is currently in talks with a small number of supplier partners where the product supplied was not of a sufficiently high standard. The company is working collaboratively with these suppliers to remedy the situation and prevent future occurrences.
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