US retailer Bed Bath & Beyond on Wednesday said it ordered an external audit of textiles from Welspun India, after Target Corp last week accused the Indian manufacturer of passing off cheap sheets as premium Egyptian cotton for two years.
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Target says it learned about the issue last month that 750,000 sheets and pillowcases supplied by Welspun India were labeled as Egyptian cotton, but were made from some other type.
Anyone who purchased the products from Target during that timeframe can submit a web form to request a full refund in the form of a gift card. It also terminated all business with the supplier.
The stock of the company plunged 10 per cent to Rs 59.30 on the BSE.
“The Welspun issues show the whole industry in a very bad light”, Sanjiv Bhasin, executive vice president for markets at Mumbai-based brokerage India Infoline Ltd., told Bloomberg.
Welspun’s shares have fallen 20% after the news.
Bed Bath & Beyond BBBY, +0.11% becomes the third American retailer, after Wal-Mart Stores Inc. Welspun on its part had said it has initiated immediate actions to investigate the root cause and was appointing an external auditor to audit its supply systems and processes. In four days, the company’s scrip has declined by over 47 per cent, wiping out Rs 4,867.3 crore from its market valuation, which now stands at Rs 5,465.70 crore.
In a conference call held on August 22, Welspun India’s Managing Director Rajesh Mandawewala, said, “We have and are continuing to engage with our key customers and we are providing all data in support to them to answer any of their concerns and queries”.
“Of course, we continue to monitor the situation”, he said.
One thing is certain: Welspun is unlikely to reach its target of $2 billion in sales by 2020.
Here’s what happened. On Friday Target issued a statement alleging that Welspun had substituted non-Egyptian cotton for sheets that were sold under the Fieldcrest brand.
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“(Welspun’s) management failed to assuage concerns on how Target’s internal audit and third-party quality checks appointed by it failed to raise any alarms over a period of two years”, analysts Sumant Kumar and Anuja Barve wrote.
