Shares of Gildan Activewear Inc. tumbled the most in more than six years after short seller Jehoshaphat Research published a negative report accusing the company of inflating revenue .
Jehoshaphat said it’s short the stock over so-called “channel stuffing,” alleging the apparel manufacturer has been boosting short-term growth figures by selling more product than necessary into a distribution channel. The firm said it came to this conclusion after interviewing former employees and customers and conducting an accounting analysis.
Shares of Gildan fell as much as 25 per cent in Toronto on Tuesday, the most intraday since October 2019, before paring those losses to trade down 20 per cent to $69.06 as of 1:30 p.m.
“This pulling-forward of sales has been cannibalizing future demand and inflating the overall growth trajectory of this business,” Jehoshaphat said in the report, forecasting a potential 20 per cent miss on analysts’ sales estimates for the second half of the year. “This will expose the weaker revenue and earnings profile of the business.”
In a statement, Gildan reiterated its fiscal 2026 guidance and said it “is confident that its current disclosure provides its investors with accurate and comprehensive information.”
Jehoshaphat’s report said Gildan’s revenues “would have been declining for the past three years if not for heavy channel-stuffing” and that the recent acquisition of underwear maker Hanesbrands Inc. “adds more drag to the pro forma growth outlook.”
UBS analysts led by Jay Sole saw the stock decline as a buying opportunity, saying they don’t 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.
It’s the second time in the past year that Jehoshaphat has taken aim at the accounting practices of a Canadian company. Last year it wrote that subprime lender Goeasy Ltd. was delaying the recognition of bad loans. Goeasy denied the claims at the time, but in March it disclosed surprising large loan losses, sending its stock plunging.