Aren't you glad this happened to you and not the new mom? She would have been embarrassed to tell you what happened and you might have thought it was something she did! First, I'd be back to the place where the fabric was purchased but I would make another quilt to gift and keep this one for your own use either as an everyday couch throw or to have in emergencies. Perhaps a quilt for the car--good time of year to have one available there for "in case" situations! How disappointed you must be but--again--glad you discovered this before the quilt was gifted!

I agree with adding applique in random places. It will look planned. :)

Consider just covering it. I appliqued a bee.
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I would agree with Tartan using applique`s. Zooming in on the small photos though, they appear to have only a 1/8th inch seam allowance, but I may be wrong. Multiple washings may cause more seams to come loose. With that in mind, as bearisgray put it, maybe just start over if you have the time before it is needed.

I suspect that the fabric may be new to you, but may have sat on the shelf for some time. Besure and preprot this to the place you bought it from. They need to know as this will affect their reputation and their sales.

I’ve never seen that happen in all my years of quilting. I don’t blame you for being upset. At his point, since it’s been washed, I think the only recourse is appliqué some cute shapes over the problem areas. Needle turn appliqué would be my technique of choice, since it isn’t adhered to the quilt underneath by fusibles, and wouldn’t show the lumps.

It’s not necessary to mention the quilt shop who carries this line of fabric, but I think it’s ok to share the mill that made this fabric so the rest of us know to avoid it like the plague. I would most certainly take the quilt in to show the quilt shop what happened so they can remove the fabric from their shelves.

To add to all previous notes. Sorry that this happened to your beautiful quilt. I would be afraid to gift this as the new Mom will undoubtedly wash and have the same happen to her, even with appliques.
I would go ahead and make another very simple with just blocks sewn in same colors. Wash all fabrics before and good luck.
Keep this one at foot of your bed to warm your toes while reading or TV watching.

Oh and return to LQS where you purchased to let them know so no one else will repeat this tragedy
Pegeth

I'm sorry this happened to you. A few years ago I had the same thing happen, since then I always wash and dry my fabric before using it. I was amazed at how much some fabrics shrunk and how thin some felt after all the sizing was washed out.

It seems that everyone has covered what may have happened just wanted to say I’m sorry this happened to you. You made something beautiful and I know how disappointed you are.