Gildan Channel Stuffing
Gildan Stock Plummets 19% Amid Short-Seller Report Alleging Channel Stuffing; Company Denies Claims
Anonymous
Key Points
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Jehoshaphat’s report says it interviewed “seven former Gildan employees, customers or distributors” and includes a quoted allegation that if the company feared it would miss sales targets, “the sales team would offer incentives to the distributors to take on more weeks of supply… or rebates at the end of the quarter, or more favorable payment terms,” describing a repeatable “move sales from Q2 to Q1… then they’d repeat the same song and dance in Q2.”
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The Jehoshaphat report argues the alleged channel-stuffing/pull-forward scheme could be harder to detect because Gildan “moves a number of its accounts receivable off its balance sheet by selling them in factoring,” and it adds that about “4% of Gildan’s public float sits in Jehoshaphat’s short position,” framing an incentive for the firm’s stance.
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Scotiabank’s note emphasized specific positives behind its constructive stance: it views Gildan “as a free cash flow conversion story” and highlighted that the company has “raised its dividend for five consecutive years” and maintains a “4% free cash flow yield,” while lowering its target by adjusting the implied earnings multiple to about “12.5 times fiscal 2027 estimates” (down from ~14x).
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GuruFocus said the stock’s selloff left it near its lows (trading around $50.34 versus a 52-week low of $46.00) and flagged a proprietary valuation gap—“GF Value™ of $62.65” implying “19.6% upside potential”—while also noting “no insider transactions… in the last 3 months.”
Shares of Gildan Activewear plunged 19% to close at $50.34 on June 16, 2026, after short-seller Jehoshaphat Research published a report accusing the company of systematic channel stuffing and hiding an estimated $510 million inventory overhang with distributors. Nasdaq reported the stock fell as much as 25% intraday before recovering slightly — its worst single-day drop in over six years.
Gildan pushed back the same afternoon. The company said it was "aware of the report" and remained confident in its financial disclosures, reiterating its fiscal 2026 guidance of $6.0 billion to $6.2 billion in revenue and adjusted EPS of $4.20 to $4.40, according to Fashion Network.
Jehoshaphat Says Gildan Borrowed Sales from Future Quarters
Jehoshaphat Research, which holds a short position equal to about 4% of Gildan's public float, says it spoke with seven former Gildan employees, customers, or distributors. One source told the firm that when Gildan feared missing sales targets, "the sales team would offer incentives to the distributors to take on more weeks of supply… or rebates at the end of the quarter, or more favorable payment terms." The source described a repeating cycle: "move sales from Q2 to Q1… then they'd repeat the same song and dance in Q2."
The firm also argued that Gildan's practice of factoring — selling its accounts receivable to third parties to collect cash faster — makes the scheme harder to detect. Jehoshaphat calculated Gildan's true Days Sales Outstanding at 129 days, and an "insane" 195 days at its largest distributor, S&S, according to Nasdaq. The firm claims Gildan's organic growth has actually been negative 3% annually for the past three years, versus the positive 1% the company reports.
Scotiabank Cuts Target but Stands by Gildan's Cash Story
Scotiabank analyst John Zamparo lowered his price target to $65 from $72 on June 17, while keeping an Outperform rating. He cut the implied earnings multiple to about 12.5 times fiscal 2027 estimates, down from roughly 14 times, to reflect near-term uncertainty. But he did not abandon his core thesis, according to Investing.com.
Zamparo called Gildan "a free cash flow conversion story." He pointed to a 4% free cash flow yield and five consecutive years of dividend increases as evidence of underlying strength. Separately, UBS analyst Jay Sole called the selloff an "excellent buying opportunity" and said Gildan was unlikely to miss its 2026 revenue targets.
HanesBrands Acquisition Adds Fuel to the Debate
Gildan closed a $4.5 billion acquisition of HanesBrands in December 2025, nearly doubling its revenue base. Management frames the current inventory buildup as a normal side effect of integrating a massive acquisition and repositioning the supply chain. Bulls at UBS and Morningstar point to $250 million in projected annual cost synergies by 2028 as the real story here.
Bears see it differently. With net debt at $4.9 billion and a leverage ratio of 3.3 times, Gildan has "little room for error," according to analyst commentary cited by KDH News. If the $510 million inventory overhang forces distributors to slow orders for several quarters, Gildan could face margin pressure and potential credit rating downgrades. Three senior executives from the company's Ethics and Fraud Compliance Committee have also recently resigned — a red flag Jehoshaphat highlighted in its report.
Law Firms Circle as Valuation Gap Widens
By June 17, multiple law firms including Johnson Fistel and Rosen Law Firm announced investigations into whether Gildan issued "materially misleading business information" about its organic demand, according to KDH News. The legal activity raises the prospect of a class-action lawsuit against the company.
Meanwhile, valuation models still suggest the stock may be cheap if the allegations prove overstated. GuruFocus puts its GF Value at $62.65, implying about 19.6% upside from the current price of $50.34. The stock's 52-week low sits at $46.00. Morningstar's fair value estimate is even higher at $93. The Q2 and Q3 2026 earnings reports will likely serve as the clearest test of whether the inventory overhang is a real structural problem or a manageable bump from the HanesBrands deal.
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