When the company was accused of paying its suppliers below the minimum wage to manufacture clothing, the Boohoo share price crumbled. From an all-time high of around 426p on June 17, the stock fell to a low of 212p a month later.
However, in the weeks since, the Boohoo share price has staged a healthy recovery. It now looks if the shares are on track to return to their all-time high.
Boohoo share price recovery
Back in June, a Sunday Times investigation claimed workers at a factory packing Boohoo’s clothes were paid below minimum wage and suffered poor working conditions.
These relations shocked the market. They also prompted the company’s third-largest shareholder, Standard Life Aberdeen, to sell its holdings.
Boohoo has since announced an independent review of its supply chain. It is planning to announce the findings alongside its half-year results at the end of September. In the meantime, it has been reported that the authorities have found no signs of poor working conditions at the company’s suppliers.
These developments have helped restore investor confidence in the business and the Boohoo share price. It would also appear that the scandal has done little to dent the group’s appeal to customers. According to my research, away from the financial press, the backlash against the business has been minimal.
The Boohoo share price surged to an all-time high this year as the e-commerce market boomed. I don’t think this trend is going to come to an end any time soon. What’s more, ethical considerations aside, over the past five years, Boohoo has shown that it knows how to navigate this market.
As such, if you are happy to look past the allegations listed above, I think the Boohoo share price could be an excellent long-term investment.
Over the past five years, the company has gone from strength to strength. It is highly cash generative and has recently been using this cash to snap up bankrupt brands at bargain prices.
These efforts should help improve the group’s growth in the years ahead. By using its online experience, and infrastructure, Boohoo has the potential to make a success of these brands by leveraging its e-commerce experience.
I think many of these businesses struggled to adapt to the online environment, which is why they ultimately failed. Boohoo has proven over the past decade that it can navigate this environment successfully and use its marketing clout to improve sales when needed.
The bottom line
The recent allegations levied against the company hurt the Boohoo share price. However, the organisation now seems to be moving past these problems. If management can put this episode behind the it, the stock could return to its all-time high. It may even be able to surpass this level as bolt-on acquisitions help the business grow its top and bottom lines.
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Rupert Hargreaves owns shares in Standard Life Aberdeen. The Motley Fool UK has recommended boohoo group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.