“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 said.
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Sales of Egyptian cotton bedding account for only about 6 percent of Welspun’s total sales, according to Kumar, but the loss to the company’s credibility means other customers could withdraw all their business as Target has done.
The sheets were sold at Target for as much as $175 per set under the labels Fieldcrest and Crowning Touch.
The company estimates 750,000 such products were impacted over the two-year span. Target is now terminating its relationship with Welspun.
Wal-Mart, the world’s largest retailer, is reviewing Welspun’s cotton certification records and plans to hold further discussions with the manufacturer.
Welspun said it is conducting an audit into the matter.
The root cause for the controversy which has ruffled quite a lot of feathers, is being investigated by Welspun, who is also in the process of appointing an external auditor to audit its supply systems and processes, as per reports. “If we discover an issue, we will handle it appropriately”, the company added, without elaborating.
The textile maker-and its shareholders-have reason to be anxious because it has a huge exposure to the United States market. It has also appointed one of the Big Four firms to conduct an audit, which will be complete in six-eight weeks. The company depends on exports for 95% of its revenue.
“We put that in motion for some time prior to the [June] shareholders meeting”, said spokeswoman Katie Boylan.
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Shares of textile maker Welspun India slumped for a third consecutive day today as the issue surrounding an inferior bedsheet variant supplied to one of its customers, Target, has now seen another client Walmart ordering a review (See: Investors target Welspun India after Target severs business ties). “Welspun is in business development phase in its healthcare segment”, analysts Avi Mehta and Sameer Gupta of IIFL Institutional Equities, a brokerage, wrote in a July 27 research note.
