Swedish home furnishing giant IKEA AB said it would continue doing business with Welspun India while it awaits the outcome of the Indian textile manufacturer's probe into its sales practices.
Global retail chain Walmart, on the other hand, suspended sourcing from Welspun India and said it is reviewing cotton certification records of the Gujarat-based textiles supplier over lapses in its supplies to US-based Target.
Welspun's shares have plummeted this week after US big-box retailer Target terminated business with the firm, saying it had passed off cheap sheets as premium Egyptian cotton.
"To our knowledge and according to our continuous verifying processes, the supplier delivers according to our agreements," a Reuters report quoted from an IKEA statement issued on Wednesday.
"However, we will follow their ongoing investigation carefully and await the outcome. Until then our business collaboration continues as usual."
IKEA also said it did not buy products made from Egyptian cotton. It said that, from the end of its 2015 fiscal year, it only bought cotton from more sustainable sources whose standards were not met by Egyptian producers.
Welspun, which was supplying bedsheets and pillowcases made of Egyptian cotton to Target, was alleged to have been substituting another type of non-Egyptian cotton in the sheets supplied between August 2014 and July 2016. Target has since decided to terminate its contract with Welspun after an investigation.
Welspun said it has initiated immediate action to investigate the root cause and was appointing an external auditor to audit its supply systems and processes.
A Walmart spokesperson said: "We are currently reviewing Welspun cotton certification records and plan to have additional conversations with Welspun. If we discover an issue, we will handle it appropriately."
A spokesperson of IKEA said that from the end of fiscal 2015, IKEA has been sourcing 100 per cent cotton from more sustainable sources as Egypt does not have sustainable cotton programmes related to cotton from more sustainable sources.