Gildan Activewear Faces Potential Investor Class Action Amid Short-Seller Allegations

Gildan Activewear Inc. (TSX/NYSE: GIL), a Canadian apparel manufacturer, is facing a potential investor class action lawsuit after a report published by short-seller Jehoshaphat Research. Toronto-based law firm Kalloghlian Myers LLP is investigating the company's claims of accuracy and transparency to investors following the report released on June 16, 2026.

The Jehoshaphat Research report alleged that Gildan has been "inflating its revenues through channel stuffing for years," thereby obscuring the company's true growth profile. The report claimed that the company artificially boosted sales figures by pushing more products to distributors than they could realistically sell. Furthermore, it suggested that Gildan's actual organic growth over the past three years was a negative 3% annual decline, contrary to the reported 1% increase, a reality allegedly obscured by financial engineering such as off-balance sheet accounts receivable factoring. The report estimated that distributors were holding approximately $510 million in excess Gildan inventory.

Gildan Activewear Inc. promptly responded to the allegations. In a statement on June 16, 2026, the company acknowledged the short-seller report and affirmed its confidence that its current disclosures provide investors with accurate and comprehensive information regarding its financial details and governance practices. Gildan also reiterated its fiscal 2026 guidance, as previously communicated, and stated it would not provide further comments at this time.

The news had a significant impact on the markets. Following the release of Jehoshaphat Research's report, Gildan Activewear shares (GIL) plummeted. On June 16, 2026, the stock fell as much as 25% on the Toronto Stock Exchange (TSX), closing down nearly 19% at C$70.39. On the New York Stock Exchange (NYSE), shares dropped by $11.62, or 18.75%, to trade at $50.35. This sharp decline led to a substantial erosion in the company's market capitalization and heightened investor concerns.

Allegations of "channel stuffing" raise serious questions about the sustainability of a company's revenue streams and growth narrative, particularly for publicly traded entities. This situation is critical for corporate governance and market transparency. Gildan, headquartered in Montreal, is a vertically integrated manufacturer of everyday basic apparel, including t-shirts, underwear, and socks, with manufacturing facilities primarily located in Central America, the Caribbean, and Asia. The company's recent growth strategies, including acquisitions of brands like Hanesbrands, are now under scrutiny.

Market analysts are closely monitoring Gildan's response to the allegations and its reaffirmation of 2026 guidance. While some analysts view the stock decline as a buying opportunity, others remain concerned about the company's financial health. For instance, UBS analysts saw the drop as a buying opportunity, while Scotiabank maintained a "Sector Outperform" rating but lowered its price target. In the coming period, legal proceedings and any concrete actions taken by the company in response to the allegations are expected to shape market expectations.