Boohoo bounces back from scandal as cash-strapped influencers keep plugging its brands

The Leicester factories scandal at online fashion giant Boohoo is likely to take as little as 5% off its sales, according to detailed social media analysis which found influencers flocking back to promote the brand in recent weeks.

Key to Boohoo's success has been its sophisticated use of Instagram and YouTube stars close to the hearts of its teenage customers. Its digital marketing through social media generally has set it apart from rivals, so search data from Google and other engines can give an accurate picture of trading patterns.

Analysts at brokerage Sandford C Bernstein today showed how Boohoo had brought vital influencers back on board after the scandal first broke, citing management's "behind-the-scenes" work to "retain and reassure" the social media stars who plug its products.

Boohoo may have also benefited from influencers' dwindling income from cash-strapped brands during Covid to persuade them to stay loyal, Bernstein said.

Research from social media marketing platform Socialbakers last month showed the number of brands working with influencers had fallen 37% on last year as brands pulled back on advertising.

"In a year when influencers are getting much smaller pay cheques than normal due to massive cuts in brand marketing budgets we are not surprised that many influencers chose not to drop Boohoo," the report says.

"After a brief period of quiet, influencers are now back in full force promoting items across the portfolio of brands."

Bernstein cited recent posts promoting Boohoo's Nasty Gal and PrettyLittleThing brands by fashion favourites such as the model Chandra (whose Lame.Cobain site has 231,000 Instagram followers) and YouTube star Sydney Crouch (with 242,000 Instagram followers).

Bernstein tracked social media followership of Boohoo's brands and found that, after a small dip after news stories last month alleged poor working practices at a Leicester supplier, the trend has now reversed for Boohoo, PrettyLittleThing and Nasty Gal.

On TikTok, followership continues rising with a particularly big spike for NastyGal in the past week.

Meanwhile, online search interest in the scandal has fallen and the #boycottboohoo hashtag use has tapered off in the past few weeks.

Bernstein analyst Aneesha Sherman said the scandal had "very limited residual social media effect - all is forgotten, back to business."

She predicted the impact of the scandal on sales would be to clip 5% off previously expected figures, with original predictions of 30% sales growth now more likely to be around 24% for 2020.

Most of that decline will be from third party platforms pulling the brand from their sites such as Zalando, Asos and Next, which Boohoo uses primarily to drive brand awareness.

Having seen its shares fall to 217p from lockdown highs of 412p, Boohoo now trades at 274p. Bernstein has a rating of "outperform" on the shares and a price target of 350p.

Bernstein's research was published as media interest in the Leicester scandal was likely to spike again as the lawyer running the investigation into the scandal sent out a public call for evidence.

Alison Levitt QC said she wanted to hear from anyone with information on working conditions in Leicester factories supplying the Boohoo group brands, how much Boohoo knew about those conditions and suggestions for improvements in the future..

She said she was particularly interested to hear from current and former workers and had set up a confidential website to which people can respond anonymously and in foreign languages.