USA 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 had said Friday it was pulling the sheets from its stores and online and terminating its relationship with Welspun.
Swedish furniture retail major IKEA on Wednesday said it will continue its business collaboration “as usual” with Welspun India till the outcome of an ongoing investigation by the Gujarat-based firm over lapses in its supplies to US-based Target. J.C. Penney, the manufacturer’s fifth-biggest customer, said the company is reviewing its Welspun products.
According to The Wall Street Journal, the textile supplier has hired one of the biggest accounting firms to conduct an investigation of its “supply systems and processes”.
On Tuesday, the stock was down another 20 percent with about 3,00,00,000 shares waiting to be sold on Bombay Stock Exchange and National Stock Exchange. “This is an issue of [the] highest priority for us”, the company said in a statement. They also estimate that Welspun India might have to pay a one-time penalty of between 1% and 2% of its total revenue. Customers who have purchased falsely labeled products can request a refund by filling out a form on the company’s website. “These sheets were produced by a number of vendors and only one of those vendors was substituting product”.
For textile maker Welspun India, it’s been a tough few days-and they will likely get tougher. It discovered in July that some 750000 sheets and pillow cases have been mislabelled as Egyptian cotton quality.
Target has terminated its partnership with Welspun.
Bed, Bath & Beyond said it is working with an independent third party to audit of the supply chain and will “aggressively pursue its investigation and take appropriate action, if needed”.
Target declined to comment on how this kind of product quality issue was missed by their internal buying team for such a long period.
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American retailers accounted for two-thirds of Welspun’s $878 million in sales in the year ended March 31, according to Mumbai-based brokerage Edelweiss Securities. “It is actually a fibre provenance issue”, it said.
