Every retailer is now aware of the cotton fraud including the big dog. WALMART
BN) Wal-Mart Reviews Welspun Records After Target Pulls Sheets
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Wal-Mart Reviews Welspun Records After Target Pulls Sheets (3)
2016-08-23 15:46:50.739 GMT
By K. Oanh Ha and Rajhkumar K Shaaw
(Bloomberg) -- Wal-Mart Stores Inc. is reviewing Welspun
India Ltd.’s cotton certification records after Target Corp.
raised concerns that the supplier is passing off cheaper bed
sheets as premium Egyptian cotton.
Wal-Mart, the world’s largest retailer, plans to hold
further discussions with Welspun and “handle it appropriately”
if any issues are discovered, according to spokeswoman Marilee
McInnis. The chain is also reviewing its other suppliers of
Egyptian cotton products out of an abundance of caution, McInnis
said. The announcement sent Welspun’s shares down by daily
limits for a second straight session.
Wal-Mart is Welspun’s third-largest customer, behind
Target, which said late last week it had pulled sheets and
pillowcases off its shelves after discovering they were
mislabeled as Egyptian cotton. It also terminated all businesses
with the supplier. A Welspun representative didn’t immediately
have a comment when reached by Bloomberg News. Part of a roughly
$3 billion conglomerate headed by Balkrishan Goenka -- with
interests spanning textiles, steel, pipes, energy and
infrastructure -- Welspun said it manufactures every fifth towel
sold in the U.S. and counts J.C. Penney Co. and Macy’s Inc among
its customers.
‘Serious Issue’
“This is a serious issue,” said S.P. Tulsian, who runs
investment advisory firm SPTulsian.com. “On one hand the company
has been talking of $2 billion top line by 2020 and on the other
hand the U.S. is a very big market for them. Now that goal of $2
billion revenue will be difficult to meet.”
Welspun fell another 20 percent to 65.85 rupees on the
Mumbai exchange Tuesday. The 36 percent two-day slide -- the
steepest since 1999 -- cut the company’s market value to 66.2
billion rupees ($990 million). Welspun Group said it wants to
become one of India’s top 50 groups by market value by 2020,
according to its website.
Sumant Kumar, an analyst at Elara Securities India Pvt.,
cut his rating on the stock to sell from buy. Goenka’s family
and group companies hold about 74 percent in the home-textiles
supplier, with his wife Dipali Goenka acting as CEO and joint
managing director. On Monday, a company connected to founder
Goenka bought 500,000 Welspun shares in the open market,
according to an exchange filing.
To read Bloomberg’s story on Target cutting ties with
Welspun, click here.
Welspun said it’s reviewing its supply chain and would hire
a “Big Four” accounting firm to examine its processes. The
company is engaging with key customers, managing director Rajesh
Mandawewala said during a conference call Monday.
Wal-Mart and Bed Bath & Beyond Inc., Welspun’s biggest
customer, sell the company’s 500- and 800-thread count sheets
online under the Crowning Touch label. They retail for as much
as $175 a set.
“It is likely that other customers too will start raising
questions over Welspun’s supplies,” said Arun Kejriwal, a
director at Kejriwal Research & Investment Pvt. in Mumbai.
Welspun makes towels, sheets, rugs and carpets for 18 of
the top 30 global retailers. Sales to Target amounted to $90
million in the fiscal year that ended in March, or about 10
percent of the company’s revenue.
Egyptian cotton, which has a longer fiber that creates a
softer thread than other cotton, often carries a higher price
because shoppers consider it to be of higher quality.
Macy’s said it sells Welspun sheets under private brands,
but not ones that are marketed as Egyptian cotton. It doesn’t
plan to make any changes, spokesman Jim Sluzewski said in an e-
mail.
“Of course, we continue to monitor the situation,” he said.
--With
