By Thyagaraju Adinarayan
Two-thirds of analysts covering fashion retailer Boohoo retained a "buy" recommendation on the company's stock despite a 45% drop in less than a week following allegations of dire conditions at its supplier factories.
Investors are increasingly focused on buying into companies based on environmental, social and governance (ESG) factors but of nine sell-side analysts that reviewed their ratings this week, at least half-a-dozen stuck by their 'buy' recommendations despite the negative media reports.
Only Liberum cut its rating on the stock to "hold".
"We accept ESG is a journey for Boohoo," Peel Hunt analyst John Stevenson, who has a "buy" on the stock, told Reuters.
Boohoo said on Wednesday it would commission an independent review of its supply chain in Britain after The Sunday Times reported that workers in a factory in Leicester, central England, who were making clothes destined for Boohoo, were paid as little as 3.50 pounds ($4.39) an hour.
The company's shares fell as much as 24% on Wednesday as several retailers removed its products from their websites..
Boohoo scores well below most peers on ESG measures compiled by Refinitiv data, with a score of 35 out of 100 while rivals Asos and Next scored 57 and 70 respectively.
A spokesman for Boohoo declined to comment on the score which is based on reported data.
The fallout from The Sunday Times article is a huge setback for Boohoo's shares, which soared five-fold until last month from its market debut in 2014. It had been one of the biggest success stories on the UK-focused Alternative Investment Market (AIM) where young, innovative companies often debut.
Still, it's a "fantastic (buying) opportunity", Stevenson added, pointing to the sell-off which wiped more than two billion pounds off the company's market value this week.
Jefferies analyst Andrew Wade stuck to his 'buy' recommendation citing "firm commitment from Boohoo to transparency and accountability throughout its UK supply chain".
Wade declined to comment on ESG issues when contacted by Reuters.
Refinitiv data showed on Wednesday a total of 21 sell-side analysts covering the stock, with 13 buy recommendations in total.
(Reporting by Thyagaraju Adinarayan; editing by Sujata Rao and Elaine Hardcastle)