Target is Mumbai-based Welspun’s second-biggest customer, behind Bed Bath & Beyond Inc., according to Bloomberg data.
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Target Corporation has accused Welspun India of supplying cheaper quality of cotton instead of Egyptian cotton. “After an extensive investigation, we recently confirmed that Welspun substituted another type of non-Egyptian cotton when producing these sheets between August 2014 and July 2016”.
Target Corp said, “This was a clear violation of both Target’s Code of Conduct and our Standards of Vendor Engagement, and was contrary to the high ethical standards to which we hold ourselves, and our vendors”.
Welspun shares, despite the current fall, is now ruling at 14 times its trading earnings and is still in double digits. The retailer shifted the items from its company stores, and on Friday it began notified that customers that it will give them a refund on the products, which were produced between August 2014 and July 2016 and sold for as much as $75.
For Target, however, besides the loss of supplies and reputational issues, there will be a huge liability in terms of refunds to customers who bought these sheets in the past two years.
To get the refund, customers must submit must complete and submit this form online.
Shares of textiles manufacturer Welspun India dived 20 per cent, wiping-out Rs 2,064 crore from its market valuation today, amid reports that Target Corp is in the process of terminating business ties with the firm.
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On news report, Welspun India said that it has initiated actions to investigate the root cause.
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Target said it is phasing out all of its products from Welspun, which it has used as a supplier for more than a decade, though the process will take time since some merchandise has already been shipped or paid for, Bloomberg said, adding the withdrawal includes only two lines of Egyptian cotton bedding, and not all of its Egyptian cotton sheets are affected. Edelweiss said Target accounted for about 10% of Welspun’s sales.
