Gildan Shares Plunge After Short Seller Alleges Revenue Inflation
Shares of T-shirt manufacturer Gildan Activewear Inc. experienced their steepest decline in over six years following a negative report from short seller Jehoshaphat Research, which accused the company of artificially inflating its revenue figures.
The stock tumbled as much as 25% in Toronto on Tuesday, marking the largest intraday drop since October 2019. Losses later moderated, with shares trading down 20% to $69.06 by 1:30 p.m.
Allegations of Channel Stuffing
Jehoshaphat Research stated it holds a short position on Gildan, alleging the company engaged in so-called channel stuffing. This practice involves selling more products into a distribution channel than necessary to boost short-term growth figures. The firm claimed its conclusion was based on interviews with former employees and customers, as well as an accounting analysis.
“This pulling-forward of sales has been cannibalizing future demand and inflating the overall growth trajectory of this business,” Jehoshaphat said in its report. The firm forecasted a potential 20% miss on analysts' sales estimates for the second half of the year, warning that “this will expose the weaker revenue and earnings profile of the business.”
Gildan’s Response
In a statement, Gildan reiterated its fiscal 2026 guidance and expressed confidence that its current disclosure provides investors with accurate and comprehensive information. The company did not directly address the specific allegations but stood by its financial reporting.
Acquisition Concerns
Jehoshaphat’s report also highlighted concerns about Gildan’s recent acquisition of underwear maker Hanesbrands Inc., suggesting it “adds more drag to the pro forma growth outlook.” The short seller claimed that Gildan’s revenues “would have been declining for the past three years if not for heavy channel-stuffing.”
Analyst Perspective
Despite the sharp decline, UBS analysts led by Jay Sole viewed the sell-off as a buying opportunity. They stated they do not believe Gildan will miss its 2026 revenue guidance. “We believe the company’s December analyst day will be a positive catalyst, not one where Gildan has to explain a big guidedown,” they wrote in a note.
Previous Target
This is the second time in the past year that Jehoshaphat Research has targeted a Canadian company over accounting practices. Last year, the firm alleged that subprime lender Goeasy Ltd. was delaying the recognition of bad loans. Goeasy denied the claims at the time, but in March it disclosed unexpectedly large loan losses, causing its stock to plunge.
