Gildan Faces Investor Class Action Over Alleged Channel Stuffing

Gildan Activewear now faces a proposed securities class action that alleges the company inflated revenue by pushing roughly $500 million of excess merchandise into its distribution network while telling investors its internal controls were sound.

The suit, filed Oct. 15 in the U.S. District Court for the Northern District of New York, names Gildan along with president and chief executive officer Glenn Chamandy, former finance chief Rhodri Harries and his successor, Luca Barile. Investor Beda Cortez filed the complaint on behalf of shareholders who bought Gildan securities between Feb. 19, 2025 and June 15, 2026.

The core claim is commercial, not technical. Gildan allegedly offered distributors incentives and extended payment terms to place orders earlier than their customers demanded. Those purchases lifted current-quarter sales by pulling forward demand that would otherwise have landed in later periods. The complaint also challenges the revenue figures and the assurances on financial controls in Gildan's 2024 and 2025 annual filings.

Where does the $500 million figure come from?

The complaint draws heavily on a June 16 report from Jehoshaphat Research, a short seller that accused Gildan of loading distributors and customers with excess inventory. The firm estimated the resulting product overhang at approximately $500 million, according to the complaint and an Oct. 16 notice from shareholder law firm Robbins LLP. Jehoshaphat also disclosed it was shorting the stock — a position that profits when shares fall.

They fell. Gildan's New York-listed shares dropped $11.63, or 18.7 percent, to close at $50.34 on June 16, per the complaint. That single-session wipeout is the market's own verdict on the report, rendered before any court had examined a page of discovery.

Gildan defended itself the same day. "The company is confident that its current disclosure provides its investors with accurate and comprehensive information regarding Gildan," it said in a statement, extending that confidence to its financial information and governance practices. It reiterated its fiscal 2026 guidance and declined further comment.

What has changed since the report?

The numbers have moved since June, and not uniformly upward. In July, Gildan updated its outlook and forecast full-year revenue at the low end of its previously announced $6 billion to $6.2 billion range. A retreat to the bottom of a guidance band is, at minimum, consistent with the complaint's thesis that future quarters had been depleted by earlier pull-forward. It is not proof of it.

The top line, meanwhile, has grown dramatically through acquisition rather than organic distribution. Gildan completed its HanesBrands acquisition in December 2025 and reported second-quarter net sales from continuing operations of $1.58 billion — up 72.3 percent year over year. A figure of that scale reflects the combined entity, and analysts will need to separate acquisition-driven growth from the underlying sell-through question the short seller raised.

What does this change for the supply chain?

For sourcing and vendor professionals, the allegations are a reminder that distributor incentives are visible in someone's accounts receivable, eventually. Extended payment terms and ordering incentives are standard tools; when they accelerate revenue without matching end demand, the correction arrives later — typically as weaker forward orders, discounted clears or a guidance cut. All three are now in play in this dispute, at least as allegations.

The lawsuit seeks damages, interest and legal expenses for alleged violations of federal securities laws, along with a jury trial. A jury would set the damages amount if the case survives that far. Most proposed class actions do not, and this one remains an allegation rather than a finding.

The clock is short for investors who want to lead it. Motions for appointment as lead plaintiff are due by Dec. 14, according to Robbins LLP's notice.

Gildan has not filed its response, and the case will turn on discovery — the order books, the payment terms, the inventory levels behind Jehoshaphat's estimate. The market has already voted once; the legal process will now determine whether that vote counted.