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Summary
- BBC has reported that the workers in the clothing and textiles supply chain of Tesco are being exploited for commercial gains.
- Tesco will be conducting an audit in these factories after being indicted by BBC’s investigation
- Tesco shares have yielded double-digit returns since the beginning of November
FTSE 100 listed British multi-retailer, Tesco Plc (LON: TSCO) has been rallying since the beginning of November. The shares are up by nearly 11 per cent since the beginning of November. While the novel coronavirus has brought most of the sectors on their knees, has proven a boon for the retailers. The shares of the company soared this month following another lockdown across the UK.
The first lockdown led to a drastic shift in the shopping behaviour of Britons. The unprecedented surge in online shopping has been a major driving force in churning profits for these retailers. Ahead of the festive season, Tesco has beefed up its online delivery slots and has launched several festive deals.
These catalysts enticed a lot of investors to consider retail stocks in their portfolio. However, a BBC’s investigation has unfolded the dark side of the UK-based retail industry.
Also read: Stock performance of Tesco and Sainsbury amid surge in UK grocery sales
According to BBC’s investigation, the workers in the clothing and textiles supply chain of Tesco are being exploited for commercial gains. They are either forced to work for around 22 hours in a day or sacked. The companies have increased the workload to the extent that they are allowed to sleep for only two hours on the floor of the factory. In addition, they are not permitted to take food, water and toilet breaks during the working hours.
Notably, the identities of the factories and whistle-blowers have not been revealed. Workers are often threatened, poorly dealt and warned over their jobs. The pandemic has left them with no other option than to comply. The news came in from factories in India, where workers are being abused and unnecessarily harassed.
Tesco has expressed its shock on these claims and is closely working with different factories to address these issues. Moreover, Tesco might conduct an audit in these factories after being indicted by BBC’s investigation and has said that it would not tolerate any sort of abuse of workers.
Also read: Tesco (LON:TSCO) defends paying dividend to its shareholders
Alternatively, exploitation of workers and poor working conditions might also lead to the spreading of the deadly pandemic. Earlier in July, UK’s leading fashion retailer, Boohoo Group (LON:BOO) was accused of spreading coronavirus infections inside Leicester based factory. According to a report by Labour Behind the Label, the workers were not practicing social distancing protocols and were forced to work in poor conditions throughout the lockdown. A local lockdown was enforced in the city of Leicester following the increase in the number of coronavirus cases. This also resulted in a steep fall in Boohoo stock prices. However, the stock has now stabilised.
A similar pattern cannot be denied for Tesco, and some weakness in price levels can be expected, though the festive sales might continue to support the stocks. TSCO shares traded at GBX 234.50 on 19 November at GMT 8:27 AM +1.
Tesco’s eternal quest for profit and shareholder value creation has allowed it to reinstate dividend payments despite the economic fallout caused by the pandemic. The tax break and lockdown induced by the coronavirus crisis have a significant amount of contribution to Tesco’s bottom-line. In these difficult times, companies must reflect moral and ethical responsibility towards their staff and refrain for exploiting resources for commercial gains.
