'Auditor crisis' wipes out £775m from Boohoo's market value

BRITISH online fashion retailer Boohoo suffered a setback on Monday(19) when it shares were down by by 20 per cent wiping out around £775 million from its market value.

Investors sold Boohoo shares after the group confirmed that PWC was standing down as its auditor and it was running a tender for a new auditor.

The share price plummet lowered Boohoo’s market valuation to around £3.2bn, down from almost £4bn the previous day, reports said.

PwC, which was its auditor for seven years, won’t participate in the tender, Boohoo said, adding that the accounting firm signed off on its 2020 accounts with an unqualified opinion.

The announcement comes after the Financial Times reported that PwC decided to stop auditing Boohoo for reputational reasons, citing unidentified people close to the situation.

The departure of the Big Four firm follows a scandal over allegations of poor factory conditions in Boohoo’s supply chain in Leicester, including illegally low pay and fire safety violations.

An independent review published last month found that Boohoo ignored warnings about significant labour violations at UK garment suppliers. However, it cleared the company of direct involvement in any abuses.

Deloitte, KPMG, BDO and Grant Thornton have ruled themselves out of the race to replace PwC, while EY is still in the running, media reports said.

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.

Founded in 2006 by Mahmud Kamani and Carol Kane, Boohoo expanded its operations quickly, listing its shares in 2014. It sells fashion, beauty and products and shoes aimed at 16 to 24-year-olds.