Gildan Activewear shares fell 20% on Tuesday after Jehoshaphat Research alleged the apparel maker inflated revenue by pushing excess inventory into distributor channels. The report adds a governance layer of CEO tax allegations and compliance committee departures to its financial case.
Jehoshaphat Research, a US-based activist short seller, has a track record of targeting Canadian companies, and their stocks often continue to slide after the initial drop. On Tuesday, the firm turned to Gildan Activewear, alleging the apparel manufacturer has been inflating revenue by pushing excess product into distributor pipelines. Gildan’s shares fell as much as 25% intraday on the Toronto Stock Exchange before paring losses to trade about 20% lower at CA$69, the steepest single-session decline in more than six years.
Gildan issued a brief statement acknowledging the report but declined to address the specific claims. The company reaffirmed its fiscal 2026 guidance and said it was confident its disclosures provided investors with accurate and comprehensive information. It said it did not intend to comment further.
Jehoshaphat alleges Gildan used channel stuffing tactics to pull forward sales
Jehoshaphat contends that Gildan has been incentivizing clients to take on more product than underlying demand can absorb, pulling forward future quarters to sustain reported growth. The report estimates distributors and customers held roughly $510 million in excess inventory as of the first quarter of 2026. Former employees and customers told Jehoshaphat that Gildan’s sales team regularly offered extended payment terms - typically 90 days, occasionally 120 - at quarter-ends to push volumes beyond near-term needs.
One former employee described the pattern as self-perpetuating: sales moved from one quarter into the prior one, then the same approach repeated the following quarter. Jehoshaphat disclosed a short position representing approximately 4% of Gildan’s public float.
Jehoshaphat’s report says factoring masks soaring DSO
The accounting case centers on days sales outstanding (DSO). Because Gildan sells nearly half its receivables off-balance sheet through third-party financing arrangements, a standard DSO calculation understates the full picture. Adding factored receivables back, Jehoshaphat calculates an adjusted DSO of 129 days for Q1 2026, a figure it describes as unprecedented in the company’s publicly available history.
At S&S Activewear, Gildan’s largest distributor, year-end 2025 DSO reached 195 days on the firm’s analysis, up from 107 the prior year. The report attributes the jump to a large-scale channel infill immediately after the HanesBrands acquisition closed. Combining the inventory overhang with consensus projections, Jehoshaphat forecasts an expectations gap of approximately $780 million for the second half of 2026, enough in its view to drive a roughly 20% revenue miss if the unwind accelerates.
A governance layer the company has yet to address
Beyond the financial case, Jehoshaphat raises governance concerns it frames as contextual rather than central to its thesis. It cites Bloomberg Tax and La Presse reporting from 2024 alleging that Revenu Québec accused CEO Glenn Chamandy of misrepresentation in connection with undeclared income – allegations Gildan has not commented on. The report also notes that three senior executives on Gildan’s Ethics and Fraud Compliance Committee have departed since the 2024 board overhaul.
The firm separately describes a reported “Locker Program” under which Gildan allegedly supplies product to customers with no payment required until inventory is drawn down, and calls on Gildan to clarify the accounting treatment publicly.
