Welspun stock down by 20% after Target snaps business ties

Mumbai: Shares of home textile maker Welspun India Ltd fell as much as 20% on Monday after Target Corp., its second-biggest client, said it was terminating its business with the company.

Explaining the reason for the termination, Target said Welspun, one of the world’s biggest textile manufacturers, had substituted one textile material with another without its knowledge.

“One of Target’s vendors, Welspun Global Brands (Welspun), was one of the producers of Egyptian Cotton 500-thread count sheets under the Fieldcrest label for Target. After an extensive investigation, we recently confirmed that Welspun substituted another type of non-Egyptian cotton when producing these sheets between August 2014 and July 2016,” said a 19 August statement on Target’s website. “These sheets were produced by a number of vendors and only one of those vendors was substituting the product,” said the statement.

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At 1pm, Welspun shares were down 19.98% at ₹ 82.30, while India’s benchmark Sensex index was down 0.40% at 27,965.15 points.

Target is Mumbai-based Welspun’s second-biggest customer, behind Bed Bath & Beyond Inc., according to Bloomberg data. The company makes towels, sheets, rugs and carpets for 18 of the top 30 global retailers. Its other major clients include Wal-Mart Stores Inc., J.C. Penney Co. and Macy’s Inc. It also manufactures towels for the Wimbledon tennis championships and the Rugby World Cup.

“We have informed Welspun that, due to this conduct, we are in the process of terminating our relationship with them,” said the statement. “We value the trust that our guests place in us. The Target team will continue to work closely with all vendors to help ensure that the products we offer to our guests meet or exceed their expectations,” the statement added.

Welspun could not be reached for comments.

Target said it is phasing out all of its products from Welspun, which it has used as a supplier for more than a decade, though the process will take time since some merchandise has already been shipped or paid for, Bloomberg said, adding the withdrawal includes only two lines of Egyptian cotton bedding, and not all of its Egyptian cotton sheets are affected.