T-shirt maker Gildan plunges on short seller’s revenue claim

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.” Photo by Graham Hughes/Bloomberg

Article content

Article content

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.

Article content

Article content

Article content

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.

Article content

Article content

“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.”

Article content

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.”

Article content

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.”

Article content

Article content

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.

Article content

Article content

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.

Article content

Article content

Article content