Target Cuts Ties With India Textile Company Welspun Over Fake Egyptian Sheets
- Author: Salvatore Jensen Sep 01, 2016,
Sep 01, 2016, 9:48
"Welspun has reaffirmed to us that the Welspun product carried in our stores is Egyptian cotton. It is actually a fibre provenance issue", it said. It's market capitalisation as of Wednesday crumbled by Rs 4,376 crore from Rs 10,335 crore on August 21 to Rs 5,958 crore on August 24.
One thing is certain: Welspun is unlikely to reach its target of $2 billion in sales by 2020. In four days, the company's scrip has declined by over 47 percent, wiping out Rs 4,867.3 crore from its market valuation, which now stands at Rs 5,465.70 crore.
Welspun India slipped for the fourth consecutive session. On Monday, a company connected to founder Goenka bought 500,000 Welspun shares in the open market, according to an exchange filing.
Welspun, on its part, said that it was investigating the product specification issue and would hire a Big Four accountancy firm to review its supply processes.
"The error is on our side, so we have to take responsibility for it", said Rajesh Mandawewala, Welspun's managing director. A JCPenney spokeswoman also confirmed an investigation in an email to Quartz while Wal-Mart told the Wall Street Journal it was "reviewing" Welspun certification records. They retail for as much as $175 a set.
It is also likely that other customers such as BBBY may also begin raising questions over Welspun's supplies.
Welspun makes towels, sheets, rugs and carpets for 18 of the top 30 global retailers.
Sales to Target Corp was, approximately, $90 million in 2015-16 for Welspun India and accounted for nearly 10 percent of its overall business.
Cotton grown and sourced from Egypt is believed to be softer and more durable than other varieties and is sold by companies seeking to charge a premium on home-furnishing products. Other major clients include J.C. Penney Co. and Macy's Inc.
Target Corp has pulled the items sold under Fieldcrest label from its stores and has offered customers a refund on the products, which were manufactured between August 2014 and July 2016 in its plant at Vapi in Gujarat.