Gildan shares plunged 20% Tuesday after short seller Jehoshaphat Research accused the clothing maker of pumping up its sales numbers. The market took the report seriously because Jehoshaphat's last Canadian target ended up crashing months later.
Gildan is one of the world's biggest basic clothing makers, with most of its t-shirts and uniforms moving through U.S. wholesale channels. A 20% revenue miss of the kind Jehoshaphat is forecasting would be a major shock for a company that has built its name on steady growth.
Jehoshaphat Research published a report Tuesday accusing Gildan of "channel stuffing." That's the practice of pushing more product into a distributor than they actually need - it boosts the current quarter's sales numbers but borrows from future demand.
Think of it as a sales rep cramming extra inventory into a customer's warehouse so this quarter looks great. Next quarter, that customer already has too much stuff and doesn't need to reorder.
The firm's claim: without the channel stuffing, Gildan's revenue would have been falling for the last three years. It forecasts a 20% miss against Wall Street's sales targets for the back half of the year, based on talks with former employees and customers plus its own accounting work.
Gildan pushed back, reiterating its fiscal 2026 outlook and saying its current disclosure gives investors accurate and comprehensive information.
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This is the second time in the past year Jehoshaphat has gone after a Canadian company's accounting. Last time, the target was subprime lender Goeasy.
The firm said Goeasy was delaying the recognition of bad loans, and Goeasy denied it. Then in March, Goeasy disclosed surprisingly large loan losses, sending its stock plunging.
That track record is why a single report knocked 20% off Gildan in one session. The market isn't only reacting to the claim - it's reacting to who's making it.
Not everyone is convinced. UBS analysts, led by Jay Sole, called the drop a buying opportunity, saying they don't believe Gildan will miss its 2026 revenue guidance and expect the December analyst day to be a positive catalyst rather than a forced guidedown.
December is the next real test. If Gildan walks back its outlook at the analyst day, Jehoshaphat looks right and the stock likely has more room to fall.
If Gildan reaffirms and delivers the numbers, the short seller's case takes a serious hit and the stock has room to recover.
The last Canadian company that shrugged off a Jehoshaphat report didn't get to shrug for long. For Gildan, the real test isn't today's stock drop - it's whether the December numbers back up the company's outlook or the short seller's case.
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