Target Cuts Ties With India Textile Company
August 22 2016 - 9:10AM
Dow Jones News
NEW DELHI—American retailer Target Corp. said it was severing
ties with one of India's largest textile suppliers, Welspun India
Ltd., after concluding the company sold it phony Egyptian-cotton
sheets.
Shares of Welspun, widely touted as an Indian-manufacturing
success story, fell 20%, the daily limit, on Monday morning before
trading of the stock was temporarily suspended. It was expected to
resume Tuesday.
Target, one of Welspun's largest customers, on Friday alleged
the Mumbai-based company had violated supply contracts by using
non-Egyptian cotton. Cotton sourced in Egypt is more expensive and
considered softer and more absorbent than other varieties.
"This is an issue of highest priority for us and we will take
all necessary steps to address it," Welspun said.
The case underscores the challenges of monitoring a global
supply chain. Large retailers often rely on a vast network of
suppliers in developing countries to manufacture the goods they
sell.
Welspun began as a small silk mill in India in 1985 and quickly
blossomed into one of Asia's largest textile makers, supplying bed
spreads, rugs and pillow covers to some of the biggest names in
retail, including Wal-Mart Stores Inc., Bed Bath & Beyond Inc.,
J.C. Penney Co. and Macy's Inc.
Welspun's management held a conference call with investors to
try to allay fears before markets in India opened Monday, according
to one analyst who participated.
American retailers accounted for two-thirds of Welspun's $878
million in sales in the year ended March 31, according to
Mumbai-based brokerage Edelweiss Securities. Edelweiss said Target
accounted for about 10% of Welspun's sales.
Welspun said it has commissioned "one of the Big Four"
accounting firms—a term used to refer to Deloitte,
PricewaterhouseCoopers, Ernst & Young and KPMG—to investigate
"our supply systems and processes."
Target said it has pulled the Welspun products from its stores
and had begun to offer refunds to people who had purchased
them.
Welspun's conduct "was contrary to the high ethical standards to
which we hold ourselves," Target said.
Write to Preetika Rana at preetika.rana@wsj.com
(END) Dow Jones Newswires
August 22, 2016 08:55 ET (12:55 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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