What happened

Tic-tac-toe, three in a row, shares of retail stocks Macy's (M -2.33%), Nordstrom (JWN -2.00%), and Party City Holdco (PRTY -60.00%) crashed in quick succession Thursday, and were trading down by 7.9%, 9.1%, and 12.4%, respectively, as of 1:54 p.m. EDT.

You can probably blame another retail stock -- Kohl's (KSS -0.64%) -- for all of that.

3 red arrows going down and crashing through the floor

Image source: Getty Images.

So what

You see, there was no particularly bad news on the wires concerning Macy's, Nordstrom, or Party City Thursday. (Well, Macy's is apparently suing Amazon to keep it from advertising on a billboard across from Macy's flagship store in New York City, but that news wouldn't set off a 9% drop in share price in Macy's stock).    

What there is, is news that Kohl's stock just got downgraded two notches -- a "double-downgrade" -- by Bank of America.

Formerly bullish on the retailer, with a $75 price target and a buy rating on the stock, BofA slashed its price target on Kohl's to $48, and downgraded the stock to underperform. The banker is worried that supply-chain issues at sportswear companies such as Nike, Under Armour, and Adidas -- key suppliers to Kohl's -- will depress sales at the retailer and lead it to miss estimates for 2021 earnings -- and for 2022 earnings as well.

Now what

That doesn't bode well for Kohl's, of course, but it's not entirely clear how this is bad news for Macy's, Nordstrom, and -- especially -- Party City. According to data from S&P Global Market Intelligence, none of those retailers lists any of these sportswear companies as key suppliers. So are investors here overreacting and throwing out all the retail babies along with one specific retailer's bathwater?


On the other hand, if the supply-chain problems that are already evident at Nike, Under Armour, and Adidas are just specific instances of a much larger trend of supply-chain issues that could hold back sales at more retailers in coming months and quarters -- as analysts are beginning to think is the case -- then investors may be onto something here. Just because Kohl's was the first big retail stock to get downgraded on supply-chain concerns doesn't mean it will be the last.