Gildan Activewear (PPAI 250187, Platinum), PPAI 100’s No. 5 supplier, has been sued by an investor in a proposed class action, prompted by a June report alleging that the company engaged in “channel stuffing” – sending distributors more stock than they ordered to make the company’s own sales growth look stronger.
- The 60-page report, published by Jehoshaphat Research on June 16, alleges that Gildan “stuffed” distributors with excess inventory beyond real demand and pulled forward more than $500 million in revenue from future 2026 quarters.
- The report includes quotes from seven former Gildan employees, customers or distributors – none of them named – describing rebates, extended payment terms and other incentives.
Jehoshaphat Research is an activist short-selling firm with a financial interest in a decline in Gildan’s stock value. The “Terms of Use” on the first page of its report reads, in part, that the firm has “a vested financial interest in being as persuasive as possible about the stocks on which we publish” and “a lot of bias and incentives, just like any investor of course.”
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Gildan’s stock dropped 18.7% the day the report was released, triggering multiple investor investigations. The apparel giant issued a statement the same day acknowledging the report and declaring that “The Company is confident that its current disclosure provides its investors with accurate and comprehensive information.”
Filed in the U.S. District Court for the Northern District of New York on October 15, the investor lawsuit alleges that the company’s initial statement was too concise and issued too quickly to reflect adequate investigation of the report’s allegations, and that the company has offered no detailed response in the months since:
“Gildan has failed to provide a competing inference to the allegation that defendants fraudulently use channel stuffing to create an appearance of revenue. This is particularly problematic in this instance, considering that Gildan’s CEO has previously been terminated for misconduct.”
It has been a tumultuous few years for Gildan, from the ouster of co-founder and CEO Glenn Chamandy in December 2023 to a lawsuit against Haitian contractors and an investigation by the U.S. Federal Trade Commission in the past three months.
- Chamandy was reappointed just six months after his ouster and a leadership tug-of-war that culminated in the abrupt resignation of the entire Gildan board of directors.
- These developments were noted in the Jehoshaphat Research report.
Through it all, Gildan continued to report sales gains and growth through acquisitions and partnerships. Sourcing Journal reports that the company updated its outlook in July, reporting “second-quarter net sales from continuing operations of $1.58 billion,” a year-over-year increase of nearly 75%.
No court date has been set for Cortez v. Gildan Activewear Inc. et al. yet, and interested investors have until December 14 to file a motion. The matter remains an ongoing legal dispute between shareholders and the company. PPAI will continue to monitor the case.
