Jehoshaphat Research is Short Gildan Activewear Inc. (NYSE:GIL and TSE:GIL).
Our opinion on why GIL is a short can be summarized in a sentence: We believe this company has been inflating its revenues through channel stuffing for years but is finally running out of room to do so, and this will expose the weaker revenue and earnings profile of the business.
We start with the financial analysis, detail the seven interviews we conducted with professionals in the field, contextualize it with corporate governance red flags, and then lay out our expectation of a catalyst path.
A note to our longtime readers: To improve readability, we have put more detail of our analysis into the endnotes than in prior opinions. The endnotes, therefore, are integral to this research opinion if you really want to evaluate it in depth.
I. GILDAN’S “TRUE” ORGANIC GROWTH IS NEGATIVE, BUT OBSCURED
Our first clue that something bad is happening at GIL is what’s happening to its DSO metrics. It’s categorically a bad thing when your time to collect from customers doubles, regardless of the explanation:
It’s not good. Source: GIL SEC filings and Jehoshaphat Research analysis. Numbers represent an average of last four quarters’ ending DSO amounts, calculated by JR and adjusted to add back off-balance-sheet receivables, and removing the (mostly immaterial) effects of acquisitions. See endnote for details.
However, a thesis to pull together the meaning of these numbers is what we care about. Ours is that GIL has been stuffing the channel for several years, persistently and increasingly, resulting in increasingly disproportionate outstanding receivables at each successive quarter-end. We believe GIL has done this to bring future revenues forward, and that it has recently pulled forward around $500m of revenues – revenues that have essentially come out of the upcoming quarters in 2026 – along with overstating its revenue and growth for several years.
We’ll start the financial analysis by unpacking the growth in DSO, since it’s foundational for understanding the rest of this research opinion.
DSO is critical in analyzing a company that goes to market via distributors
When a short seller presents you with a DSO-oriented argument, you need to ask the question “Why should I care?” Every company is different, and sometimes DSOs can go up for irrelevant or benign reasons. In the case of a manufacturer selling to distributors, analyzing DSOs is more commonly a high-value activity, because the length of time these products sit at a distributor before the distributor pays for them is informative. Here are some reasons why a manufacturer going to market via distributors might experience rising DSOs:
- If end users are not buying from your distributor at the same pace at which your distributor is buying from you, your distributor may ask for (or you may offer) more time to pay you. Taking invoices from 30 days to 60 days means receivables sit unpaid longer, and DSO goes up.
- If you’re rushing to make your quarterly sales target, you may try to incentivize your distributor to take extra product right before the quarter ends so you can book the sales in this quarter rather than next. This “back-end loading” manifests in receivables sitting at quarter-end; DSO goes up.
- If you are really desperate, you might offer distributors the ability to take your product but not pay for it until they’ve sold it through. If you call that a sale, that sort of thing will send your DSO up – possibly way up.
- If you consistently send more into your distributors than they sell through to their customers, but you allow lengthy payment terms, the distributor might happily take more products knowing the carrying costs and the risk of obsolescence are low – especially if the distributor has a “right of return” as GIL offers!
No serious analyst is going to deny the importance of DSOs for a company like GIL. But many serious analysts fail to focus on it, especially when the balance sheet only gives half the picture.
GIL’s problem is obscured by third-party receivables “financing”
A basic DSO analysis does not work for GIL. If you simply use GIL’s receivables divided by quarterly revenues for Q126, and multiply the result by 90, you get a DSO of 78 days. While this would be close to an all-time high for GIL and therefore cause for investor concern, it’s still incomplete.
This is because 40% of GIL’s accounts receivable do not currently show up on its balance sheet. We need to turn to some small print in the GIL filings to see this:
As of December 28, 2025, trade accounts receivables [sic] being serviced under receivables purchase agreements amounted to $777.0 million (December 29, 2024 – $272.1 million)… All trade accounts receivables sold under the receivables purchase agreement are removed from the consolidated statements of financial position, as the sale of the trade accounts receivables qualify for de-recognition.
We can also refer to this practice of selling receivables to third parties as accounts receivable factoring. If we want to know how much sold product GIL’s customers have yet to pay for, we need to add those off-balance-sheet receivables back into the DSO analysis. That gets us to 129 days for Q126 (and an average of 120 days over the last four quarters).
If we roll that analysis back all the way to the year 2000 and make minor adjustments for the quarters in which GIL did acquisitions, we can see the trend over time. There’s no precedent for a DSO this high, and there shouldn’t be – because four months is an unreasonable amount of time to float your customer base. Remember, 129 is an aggregate number – it isn’t telling you that some customers are ostensibly getting four months to pay, it’s telling you that the average customer is ostensibly getting four months.
GIL has increased its use of this A/R factoring over time, which has obscured the growth in its “true” DSO. GIL began factoring in 2016. On average, 20% of GIL’s receivables were factored before 2020; this percentage reached 45% as of the end of 2025.
Once you “unfactor” GIL’s balance sheet, it’s clear something is really wrong
For Q126, GIL’s “unfactored” or “true” DSO was 129 days. This is as simple as ([$1,010m AR on balance sheet + $667m AR being serviced under receivables purchased agreements]/$1,166m quarterly revenues) X 90.
GIL’s AR is seasonal, but that’s almost irrelevant because aside from Q425, GIL’s “true” DSO has never been anywhere near this high. The pace of this growth is equally concerning; this metric is up 16% YOY, 39% over 2yrs, and on our math has been increasing, on a YOY basis, by anywhere from 8-66% every single quarter since Q222. A snapshot of how this looks in our Excel sheet, in case you want to duplicate our math:
For the last 13 quarters, GIL’s quarterly filings have consistently offered an anodyne-sounding “higher days sales outstanding (DSO) as a result of longer payment terms” explanation for the rapid growth in receivables on the balance sheet. This is an almost completely useless statement, akin to a doctor telling you at 13 medical visits in a row that “since your visit this time last year, the scale indicates a higher number, which is a result of…you weighing more.” (Oh by the way, you now weigh 400 pounds.)
What’s more, this tepid language is explaining the A/R expansion that is visible on the balance sheet. It is not explaining the unseen, “true” expansion which is, incredibly, far worse. We can compare the two:
The numbers are virtually the same until 2016, when GIL begins factoring, except for minor noise caused by acquisitions which we remove in our adjusted calculation. See endnote for details.
Problem appears to be concentrated at one distributor
There is an informative bifurcation in GIL’s DSO, at its biggest distributor versus everywhere else in the company.
In 2024, 39% of GIL’s sales went to two distributors (we believe these two distributors are S&S and alphabroder). But at the end of 2024, 69% of GIL’s A/R were owed by these two distributors combined. We are given this information annually, since 2023.
In 2024, S&S bought alphabroder, and in GIL’s 2025 annual report, we are given combined revenue and A/R information for the two largest distributors, whereas we have separated information for the two distributors for 2023 and 2024. This enables us to figure out three years of year-end DSOs for the pro forma combined distributor: GIL’s DSO from S&S, pro forma for its acquisition of alphabroder, went from 79 days in 2023, to 107 days in 2024, to 195 days in 2025. 79 days would have been concerning enough as GIL taking nearly three months to get paid by a key distributor would be odd, but 195 days is just insane, full stop.
Seeing a distributor have that high of a Q425 DSO was puzzling. How could an apparel supplier be sitting on over six months of unpaid Gildan product right after Christmas? Our first thought was that maybe this is just a function of Hanes A/R being brought onto GIL’s balance sheet, creating a distorted image with full Hanes A/R in the numerator but only one month of Hanes sales in the denominator, as Hanes was closed on December 1, 2025. But this does not seem like a good explanation, because Hanes did very little business with distributors; prior to being acquired, its only 10%+ customers were Walmart, Amazon and Target. Also,Hanes had only $316m in total A/R on its balance sheet when GIL bought it, but the year-on-year increase in S&S A/R at GIL in Q425, at $266m, was almost that much. In sum, we’re confident that what did not happen here was Hanes having ~84% of its A/R sitting at S&S on the day GIL acquired it.
But the above does not rule out the possibility of GIL stuffing a ton of Hanes product into the S&S channel after buying Hanes. That is indeed what we think happened here. Our conclusion is that GIL:
- Had been stuffing S&S with product at year-end in 2023, to the point where it had a year-end DSO of 116 days (while alphabroder had a totally “normal” DSO of 29 days), for a combined DSO of 79 days
- Further stuffed S&S (or both them and alphabroder) with excess product to the point where the combined two distributors had a DSO of 107 days at the end of 2024, up from 79 at the end of 2023
- Acquired Hanes in December 2025, which had been selling relatively little into the distributor channel
- Jammed $266m, in December alone, beyond what was done in December 2024 into S&S (which by then owned alphabroder), driving the A/R in that channel way up in a year in which total sales to that combined distributor pair were down, bringing the S&S DSO to a truly insane 195 days at year-end 2025
- Likely now has a ton of Hanes product alongside a ton of legacy GIL product in the distributor channel
We don’t see how GIL could have brought the S&S distributor to $640m of year-end A/R without some help from Hanes, but it probably doesn’t matter anyway (a completely “legacy GIL” stuffing of S&S to this degree all by itself would be even more alarming). In any event, 2025 looks to be a continuation of the bloating of the S&S distribution channel that has apparently been inflating for the past two years, at least. Unfortunately, we don’t have customer-specific A/R prior to 2023, but we would theorize that the out-of-control DSO inflation that’s been happening since late 2022 has been focused primarily on this distributor channel all along.
Across the remainder of GIL’s business, DSO has gone up, but by much less. However, as we’ll discuss in the fieldwork section, the problem is by no means strictly limited to the distribution channel.
Read the full report here by Jehoshaphat Research
