Welspun Loses Its Second Largest Customer

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Welspun Loses Its Second Largest Customer

Target dumps Welspun following delivery of fake Egyptian-cotton sheets

- Sheets made from other cotton labeled and sold as Egyptian for two years

- Mumbai firm loses contract with its second largest customer

Welspun India Ltd. will appoint an external auditor to investigate after Target Corp. severed ties with the textile manufacturer, which the retailer said had passed off cheaper cotton sheets as premium Egyptian cotton for two years.

Target said on Friday it discovered last month that some 750,000 sheets and pillowcases from Welspun had been mislabeled as Egyptian cotton. Target pulled the items, sold under the Fieldcrest label, from its stores and has offered customers refunds on the products, which were made between August 2014 and July 2016.

A “Big Four” accounting firm will be brought in to examine supply systems and processes, Mumbai-based Welspun said Saturday in a statement released through the Bombay Stock Exchange. “This is an issue of highest priority to us and we will take all necessary steps to address it,” the Mumbai-based textile manufacturer said in its statement.

Welspun executives, including managing director Rajesh Mandawewala, held a conference call on Monday at 8:30 a.m. to discuss the situation, the company said in a separate statement.

Target is Welspun’s second largest customer, behind Bed Bath & Beyond Inc. Welspun makes towels, sheets, rugs and carpets for 18 of the top 30 global retailers. Other major clients include Wal-Mart Stores Inc., J.C. Penney Co. and Macy’s Inc. It also manufactures the towels for the Wimbledon tennis championships and the Rugby World Cup.

Phasing Out

“We have informed Welspun that, due to this conduct, we are in the process of terminating our relationship with them,” Molly Snyder, a Target spokeswoman, said on Friday. “We value the trust that our guests place in us. The Target team will continue to work closely with all vendors to help ensure that the products we offer to our guests meet or exceed their expectations.”

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. The withdrawal only includes two lines of Egyptian cotton bedding, and not all of its Egyptian cotton sheets are affected.

Egyptian cotton, which has a longer fibre that creates a softer thread than other cotton, often carries a higher price because shoppers consider it to be higher quality.

Meanwhile, Welspun India’s share prices have taken a beating following the news of Target breaking ties with the company.