Shares in Boohoo and Quiz took a tumble today as the two fast fashion firms came under increasing pressure from brokers and fund managers in the City.
The two companies have allegedly been using suppliers in Leicester that failed to meet legal minimum wage requirements.
On Friday one of Boohoo's biggest investors Standard Life Aberdeen sold down its stake and labelled the firm's response to illegal pay allegations "inadequate".
Standard has now offloaded most of its 3% holding in the company.
Boohoo has also become a target for hedge fund managers with PSQUARED Asset Management placing bets worth more than £20million on the company's share price falling.
Over the weekend rival Quiz was dragged into the scandal amid similar reports about the firm's suppliers. This morning Quiz suspended a supplier.
Greg Lawless, analyst at Shore Capital, said this morning: "We note the statement from fast-fashion retailer Quiz this morning in response to weekend press reports with allegations that they too have been taking products made in Leicester where the supplier is not paying national living wage levels.
"The Quiz story is similar to the Boohoo allegations, where a supplier based in Leicester has subcontracted out to a further factory to supply product. In its initial investigation following the media reports Quiz has suspended the supplier.
"So, another similar example of a fast-fashion retailer with alleged illegal working practices. We also note on Friday that Aberdeen Standard Life sold down 27 million shares (almost their entire stake in Boohoo) describing Boohoo’s subsequent actions as “inadequate.” Having seen a significant shareholder being so vocal with their concerns surrounding working practices, we believe that there will be growing difficulty for ESG investors in this arena and reiterate our sell rating on Boohoo."
Shares in Boohoo were down 14% or 40p at 240p, while Quiz lost 6% or 0.4p at 6.4p.
