Wal-Mart (NYSE:WMT) has announced that it is reviewing the products and records of Welspun India after a scandal emerged alleging the company was selling linens with incorrect certifications. The supplier has been accused of selling cheaper bedsheets as premium Egyptian cotton. Egyptian cotton has a longer fiber that creates a softer thread than other cotton, so often carries a higher price because shoppers believe it to be of higher quality.
The investigation comes days after Target terminated its relationship with the manufacturer. Target discovered that it had been supplied with nearly a million sheet sets labeled as “Egyptian Cotton” that were actually made from non-Egyptian cotton. Target also began notifying customers that they’ll get a refund on certain products sold under the Fieldcrest label between August 2014 and July 2016. The recall affects two lines of Egyptian cotton bedding.
Wal-Mart now wants to determine if there are any discrepancies with the quality and labeling of sheets and pillowcases provided by the company. According to a spokesperson for Wal-Mart, the company will hold discussions with Welspun and any issues uncovered will be handled appropriately. A rep for Welspun declined to provide comment on Walmart’s review. The company released a statement saying that it was reviewing its supply chain and would hire an accounting firm to examine its processes.
Welspun India is one of the world’s biggest textile manufacturers. The company makes towels, sheets, rugs and carpets for 18 of the top 30 retailers around the world. Welspun manufactures one out of every five towels sold in the U.S. Wal-Mart is Welspun’s third-largest customer, behind Target. Sales to Target totaled $90 million in the fiscal year that ended in March, accounting for roughly 10 percent of the company’s revenue.
While Wal-Mart is the world’s largest retailer, Welspun’s largest customer is Bed Bath & Beyond. Both Wal-Mart and Bed Bath & Beyond sell Welspun’s 500 and 800 thread count sheets online under the Crowning Touch label for about $175. The company also counts J.C. Penney Co. and Macy’s Inc. among its customers. Macy’s sells Welspun sheets under private brands, but not ones that are marketed as Egyptian cotton. Other retailers are expected to follow in Target’s footsteps and end their relationship with the manufacturer.
Welspun is part of a roughly $3 billion conglomerate headed by Balkrishan Goenka. Goenka’s family and group companies hold roughly 74 percent in the home-textiles supplier. Goenka’s wife, Dipali Goenka, is CEO and joint managing director of Welspun.