Executive Briefings

Dirty Linen: A Bed Sheets Scandal Hits the Cotton Industry

Huddled inside Target Corp.'s headquarters in downtown Minneapolis, a team of investigators spent the summer trying to answer what should have been a simple question: What were hundreds of thousands of the retailer's sheets actually made of?

What they discovered has undermined trust in a global luxury product and set off a salvo of class-action lawsuits that have created a king-sized public relations challenge for the Indian textiles industry and the U.S. companies it supplies.

Turns out that major American retailers, including Target and Wal-Mart Stores Inc., have been selling premium-priced sheets purportedly made of Egyptian cotton - a byword for luxury in linens - but that may in reality be woven with lower-quality cotton blends.

Three suits seeking to be certified as class-actions have been filed against supplier Welspun India Ltd. - and a separate one last week was directed at Wal-Mart. That complaint, filed in New York by customer Dorothy Monahan, accuses the world’s largest retailer of questioning the fiber content of Welspun’s products as early as 2008, but not halting sales until after Target did so in August. Wal-Mart said it will “vigorously defend” itself.

The other lawsuits, all filed in the U.S. against Welspun, allege the company fraudulently labeled its bed sheets as Egyptian cotton. Welspun declined to comment on the suits. Managing Director Rajesh Mandawewala told analysts during a conference call in August that “the error is on our side so we have to take responsibility for it.” Target, meanwhile, hasn’t been sued.

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What they discovered has undermined trust in a global luxury product and set off a salvo of class-action lawsuits that have created a king-sized public relations challenge for the Indian textiles industry and the U.S. companies it supplies.

Turns out that major American retailers, including Target and Wal-Mart Stores Inc., have been selling premium-priced sheets purportedly made of Egyptian cotton - a byword for luxury in linens - but that may in reality be woven with lower-quality cotton blends.

Three suits seeking to be certified as class-actions have been filed against supplier Welspun India Ltd. - and a separate one last week was directed at Wal-Mart. That complaint, filed in New York by customer Dorothy Monahan, accuses the world’s largest retailer of questioning the fiber content of Welspun’s products as early as 2008, but not halting sales until after Target did so in August. Wal-Mart said it will “vigorously defend” itself.

The other lawsuits, all filed in the U.S. against Welspun, allege the company fraudulently labeled its bed sheets as Egyptian cotton. Welspun declined to comment on the suits. Managing Director Rajesh Mandawewala told analysts during a conference call in August that “the error is on our side so we have to take responsibility for it.” Target, meanwhile, hasn’t been sued.

Read Full Article