Boohoo could be close to settlement on Californian class action

By

Sandra Halliday

Published
Nov 4, 2021

Boohoo Group has delivered a brief update on the Californian Class Action Claim that has been brought against it and the update suggests it could be about to put its legal woes behind it.

The company said it’s “pleased to report that the parties have notified the District Court that they have agreed to the terms of a preliminary settlement relating to the Claim. The preliminary settlement will be covered in full by the existing provisions disclosed in the Group's latest published accounts.

“Whilst there is no guarantee that the preliminary settlement will result in a final settlement of the Claim, the parties will now work together to incorporate the terms of the preliminary settlement into a legally binding settlement agreement.”

The lawsuit filed in California last year had claimed that a number of the company's brands (including PrettyLittleThing and Nasty Gal) were offering discounts based on "fake" original prices in the US. It also claimed the practice had been going on for up to five years and there were suggestions that the company could be forced to pay over $100 million in damages.

In a note, Jefferies analysts said: “According to the H1 22 results, Boohoo's claims provisions totalled £19.1 million, with management having stated that this line also includes other legal items (e.g. trademark, design/image rights, employment claims). We therefore infer that the settlement is less than this £19 million, and not significant from a group cash flow perspective.”

While it added that it was disappointing that there’s any outflow associated, it’s pleased to see the issue cleared up, removing another distraction from the firm’s core focus.