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Indian textile maker's sheets under scrutiny

| Thursday, Aug. 25, 2016, 11:00 p.m.

NEW YORK — U.S. retailers including J.C. Penney and Wal-Mart are scrutinizing whether sheets Welspun India Ltd. said were high-end Egyptian cotton were in fact cheaper knock-offs, a question that has sent the textile company's shares plunging.

Since Target announced Friday that it was pulling the sheets from its stores and online and was terminating its relationship with the company, other retailers have launched investigations into the certification claims from Welspun, one of India's largest textile makers.

Target said an investigation confirmed that Welspun used another type of non-Egyptian cotton between August 2014 and July, and the retailer is offering refunds to its RedCard and customers who bought the sheets during that time. Target declined to say what spurred its investigation.

Welspun told investors this week it's conducting an audit. It said in a conference call that the product in question with Target accounts for about 1 percent of the textile company's sales.

Welspun's shares have fallen more than 40 percent since Friday on the BSE, the largest exchange in India, and were down 8 percent Thursday.

Wal-Mart spokeswoman Marilee McInnis said Welspun supplies the retailer with a number of products, including some of the sheets. She said Wal-Mart is reviewing Welspun's certification records and plans to have “additional conversations” with the company.

Bed, Bath & Beyond said it is working with an independent third party to audit the supply chain and will “aggressively pursue its investigation and take appropriate action, if needed.” Penney said it was too early in its review to determine what actions may be necessary.

Macy's said Welspun produces some of the chain's private-brand products but they are not involved in this situation because they are not marketed as 100 percent Egyptian cotton. But it said it is monitoring developments.

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