Gildan Activewear (GIL) is expected to deliver a solid Q2 report and achieve its 2026 guidance despite recent allegations, UBS said in a note to investors dated Wednesday.

The apparel maker's shares fell 18.8% coinciding with a short-seller's report claiming the company's 2026 revenue will fall short of guidance and that it had been inflating revenues, arguing that Gildan's distributors had built up inventory, UBS said.

Gildan reiterated its 2026 guidance and said it is confident its current disclosure provides investors with accurate and comprehensive information, UBS said.

UBS forecast that Gildan "will deliver a solid Q2 report and maintain the momentum through the rest of the year."

The firm said its view is based on channel checks, industry experience and a conversation with management.

It also said Gildan outperformed rivals in 2025 because of "tariff positioning" and complications at other companies rather than revenue inflation.

Conversations with industry players "also suggest demand is strong" while channel checks showed prices for Gildan products are rising. "

If distributors had too much inventory, for as long as the short claims, the most likely natural response would be promotions and discounts to clear inventory," UBS said.

UBS rated the stock a buy with a 12-month price target of $110 per share.