Textile Company Caught Misrepresenting Egyptian Cotton Products

A global textile company and the second-largest terry towel producer in the world was accused by Target Corp. of mislabeling Egyptian Cotton products. Target terminated business with Welspun India after the textile company had provided 750,000 sheets and pillowcases between August 2014 and July 2016. The American retail chain has pulled the fraudulent items from its shelves and will offer refunds to customers.

Welspun makes towels, sheets, rugs and carpets for 18 of the top 30 global retailers including Wal-Mart Stores Inc., J.C. Penney Co. and Macy’s Inc. According to Bloomberg, Target is Welspun’s second-biggest customer, behind Bed Bath & Beyond Inc., which also carries Welspun Egyptian cotton sheets online.

“There has been a failure on our part, without an ambiguity,” Welspun managing director Rajesh Mandawewala said on a conference call. “The error is on our side so we have to take responsibility for it.” The company has hired an external accounting firm to conduct an investigation, and said it is trying to identify the error in its supply chain that caused the mislabeling.

Mandawewala said that sales from Target amounted to $90 million in the fiscal year that ended in March, accounting for about 10% of Welspun’s revenue. Company shares fell 20% – the most in a decade – following Target’s termination of the relationship.

Dozens of Egyptian cotton products are available in the promotional product industry, including polos, towels, chef coats, bed sheets and more.

Bernie DeAnnuntis, owner of Think Tank Golf (asi/91130), offers an assortment of Egyptian cotton golf polos. When it comes to ensuring he’s getting verifiable Egyptian cotton products for his customers, DeAnnuntis said he relies upon only the big name, reputable brands like Peter Millar and Bobby Jones.

“When they say it’s Egyptian cotton, it is,” DeAnnuntis said. “They have requirements and specifications to make sure. I’ve never been confronted with a fake product from them.”