Gildan Stock Plunges 19% on Channel Stuffing Allegations, June 17

Shares of Gildan Activewear dropped 18.75% to $70.39 CAD on June 16 after short seller Jehoshaphat Research alleged the Montreal-based T-shirt maker inflated sales through channel stuffing. The stock fell as much as 25% during the day, wiping $3 billion from the company’s $13 billion market value. Gildan denied the allegations but offered no detailed rebuttal, citing a policy of not commenting further.

What Jehoshaphat Alleged

Jehoshaphat Research claimed Gildan pushed excess inventory to distributors and retailers beyond what they could realistically sell to inflate quarterly revenue. The report alleged this practice has been ongoing for years and is now running out of room to continue. Jehoshaphat interviewed seven former employees, customers, or distributors and conducted accounting analysis. The firm forecasts Gildan will miss analyst sales estimates by 20% in the second half of 2026 and estimated a $500 million product overhang from channel stuffing.

How the Firm Operates

Jehoshaphat Research holds a short position worth 4% of Gildan’s public float, meaning it profits if the stock falls. The Florida-based firm has a track record in Canada. In September 2025, it published a report on subprime lender goeasy Ltd. alleging hidden loan losses. Months later, goeasy announced surging loan losses and suspended its dividend. That stock has fallen 75% over the past year.

Gildan’s Response and Guidance

Gildan stated it is confident its current disclosure provides accurate and comprehensive financial information. The company reiterated its fiscal 2026 guidance of US$6 billion to US$6.2 billion in revenue and free cash flow above US$850 million. The company declined to address the allegations directly and said it will not provide further comments.

Legal Action Begins

Multiple law firms launched securities fraud investigations on June 16. Block & Leviton and Rosen Law Firm are investigating whether Gildan committed securities violations through misleading business disclosures. These firms are seeking to represent investors who lost money and may file class action lawsuits to recover losses on behalf of shareholders.

Final Thoughts

Gildan faces severe credibility damage and legal exposure. With the stock down 19% and fraud investigations underway, investors should monitor Q2 earnings closely to verify whether revenue meets guidance or confirms Jehoshaphat’s 20% miss forecast.

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