Boohoo’s credit insurer, Allianz Trade, has cut its supplier’s insurance cover, adding to the financial challenges already burdening the fast-fashion retailer.
According to The Sunday Times, the cover has been cut by an average of 50%, with some suppliers having their coverage level cut to zero from September this year.
The insurance protects suppliers against the risk of their client going bankrupt before payment is received for products that it has ordered, however, when cover is unavailable most suppliers demand payment for items upfront.
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The move follows credit insurers reducing their cover for online-only fashion retailer Asos’s suppliers.
“With the credit insurance capacity less than 50 utilised, we wouldn’t expect any real impact from the reduction,” A Boohoo spokesperson told the title.
Earlier this year, the fast-fashion retailer asked suppliers for a discount on delivered and undelivered items in a bid to cut costs across its supply chain. At the time, one supplier said the retailer “demanded” a 10% discount, claiming “it turns all orders produced into losses.”
The company later asked for discounts of up to 30% on outstanding orders from its Turkey-based suppliers, hoping to do the same with its Pakistani suppliers too.
The news comes as Boohoo recently reported a 90.7% pre-tax loss in the year ended 28 February 2023, with sales falling 11%, or 9% in the UK.
However, Boohoo claimed that it expects performance to improve in its current financial year.
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Boohoo features as a case study in RetailX 2023 Europe Fashion report, which unpacks how the European fashion industry has evolved in the past year and where it may be heading as it embraces sustainability, social commerce, the metaverse, AI and ChatGPT.
