Boohoo has settled a $100m (£80m) US lawsuit that alleged the online fashion retailer used fake promotions to mislead shoppers.
The Manchester-based company said the deal had been agreed “without admission of liability” and within its existing provision for legal costs of £18m, a figure that included costs from other more common cases such as trademark infringements. or labor claims.
In the case, filed in California, Boohoo and its PrettyLittleThing and NastyGal brands were accused of making false sales and promotions in the US for at least four to five years.
The lawsuit alleged that the discounts offered to US shoppers were based on inflated or “false” original prices that customers were almost never asked to pay.
Boohoo’s share price fell more than 5% on Tuesday after announcing the deal, but analysts said this was part of an overall drop in online fashion retail stocks in reaction to lackluster results from the German specialist. About You.
Andrew Wade, an analyst at Jefferies, said it was “marginally positive to have the problem resolved and covered by existing provisions.”
The resolution of the case comes as Boohoo tries to overcome a difficult few years in which its reputation has been damaged by allegations of poor working conditions at its UK suppliers’ factories in Leicester.
The company instituted an independent review of its employment practices and has implemented a number of changes, including opening its own factory in Leicester.
Boohoo has indicated its clothing prices are likely to rise this year after profits nearly halved amid weakening consumer demand and rising costs.
The online fashion specialist said pre-tax profit fell 94% to £7.8m in the year to February 28. Sales rose 14% to almost £2bn, but the pace of growth was a considerable step back from more than 40% a year earlier, as overseas deliveries were disrupted by the disruption of international shipments and hesitating demand during the coronavirus pandemic.