Indian textile maker Welspun under scrutiny over sheets

NEW YORK — U.S. retailers including J.C. Penney and Wal-Mart are scrutinizing whether sheets Welspun India Ltd. had said were high-end Egyptian cotton were actually cheaper knock-offs, questions that have sent the textile company’s shares plunging more than 40 percent.

Since Target announced Aug. 19 that it was pulling the sheets from its stores and online and was terminating its relationship with the company, other retailers have launched investigations into the certification claims from Welspun, one of India’s largest textile makers.

Target said an investigation confirmed that Welspun had used another type of non-Egyptian cotton between August 2014 and July 2016, and the retailer is offering refunds to its RedCard and Target.com customers who bought the sheets during that time. Target declined to say what spurred its investigation.

Welspun told investors this week it’s conducting an audit. It said in a conference call that the product in question with Target is about 1 percent of the textile company’s overall sales and about 10 percent its business with Target. Welspun’s shares have fallen more than 40 percent since Friday on the BSE, the largest exchange in India, and were down 8 percent Thursday.

Wal-Mart spokeswoman Marilee McInnis said Welspun supplies the retailer with a number of products including some of the sheets. She said Wal-Mart is reviewing Welspun’s certification records and plans to have “additional conversations” with the company.

“If we discover an issue, we will handle it appropriately,” she added.

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.” Penney said it was too early in its review to determine what actions may be necessary.

Macy’s said Welspun produces some of the chain’s private-brand products but they are not involved in this situation because they are not marketed as 100 percent Egyptian cotton. But it said it was monitoring developments.