Gildan faces fraud probe after 18.75% plunge on channel stuffing claims

Bleichmar Fonti & Auld LLP opened a securities fraud investigation into Gildan Activewear after the stock plunged 18.75% on channel stuffing allegations.

The firm is examining whether Gildan misled investors about the true drivers and sustainability of its reported revenue, BFA said in a Sept. 2 statement. The company had attributed strong sales to "share gains in key growth categories" and "strong market response to products," claims now under scrutiny.

Gildan shares fell $11.62 to $50.35 on June 16 after short seller Jehoshaphat Research published a report titled "Stuffing All of the Channel Some of the Time?" alleging the apparel maker "has been stuffing the channel to make revenues look like they're growing." The report, based on interviews with former employees, customers, and distributors, said the practice was "cannibalizing future demand and inflating the overall growth trajectory of this business." The stock had closed at $61.97 on June 15 before the report was published.

The investigation adds to mounting legal pressure on Gildan, which completed its acquisition of HanesBrands in December 2025. Rosen Law Firm launched a formal investigation on Aug. 26, and Robbins LLP has filed a class action on behalf of former HanesBrands shareholders who received Gildan common shares in the cash-and-stock exchange. The convergence of these actions highlights a critical divergence between Gildan's reported top-line growth and its underlying operational health.

Gildan produces basic apparel including T-shirts, fleece, underwear, and socks, selling primarily in bulk to wholesalers, screen printers, and retailers. The channel stuffing allegations suggest revenue recognition was decoupled from actual end-consumer demand, with inventory allegedly piling up on distributor shelves rather than reaching end consumers. This dynamic implies that cash flow generated from these sales may have been delayed or illusory, raising questions about the quality of earnings reported during the period leading up to the HanesBrands acquisition.

BFA has recovered more than $900 million in value from Tesla Inc.'s board and $420 million from Teva Pharmaceutical Industries in prior cases. The firm represents shareholders on a contingency fee basis, meaning clients pay no attorneys' fees unless there is a recovery.

Investors who acquired Gildan securities through the HanesBrands exchange and suffered losses may have legal options under federal securities laws. BFA is urging affected shareholders to contact the firm, with all representation on a contingency fee basis.

The investigation could lead to regulatory penalties, potential restatement of financials, and further deterioration of investor confidence in Gildan's stock. The company's next earnings report will be closely watched for any adjustments to previously reported revenue figures, and the outcome of the probe could have implications for the valuation of the HanesBrands acquisition.

This article is for informational purposes only and does not constitute investment advice.