Welspun India Ltd. shares slid as much as 5 percent in Mumbai trading after Wal-Mart Stores Inc. stopped selling the supplier's Egyptian-cotton sheets over concerns that the products' origins may be mislabeled.
The stock traded 4.7 percent lower at 54.15 rupees as of 9:20 a.m. local time. The world's largest retailer said on Friday that Welspun wasn't able to assure that the sheets are 100 percent Egyptian cotton. Welspun's market value has dropped by about half since the controversy erupted Aug. 19, when Target Corp. cut ties with the Indian vendor after discovering sheets and pillowcases that were labeled as premium Egyptian cotton were made with cheaper fiber. Unlike Target, Wal-Mart said it wouldn't end all business with Welspun.
Wal-Mart's move is a further blow to Mumbai-based Welspun's image, as other household-name customers, including Bed Bath & Beyond Inc., and J.C. Penny Co. also review the authenticity of its products. The affected goods represent about 6 percent of Welspun's total business, the Indian manufacturer founded by Balkrishan Goenka said Saturday. The company, which has said it had engaged a Big Four firm to audit its supply processes, also said it's putting stronger quality controls in place and adopting new labeling practices.
Customers often pay a premium for Egyptian-cotton products because they are perceived to be softer and more durable. Sheets made from cotton grown in other countries don't always carry the same cachet among Americans.
Wal-Mart sold the Welspun sheets and pillow cases under the names Better Homes & Gardens and Canopy. The company will offer refunds to customers who have purchased the sheets.