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Here's Why Kohl's Stock Is Crashing This Week

By Howard Smith – Oct 1, 2021 at 10:58AM

Key Points

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Retailers are facing increasing headwinds of long lead times, higher input costs, and the recent COVID resurgence.

What happened

As of early Friday morning, shares of retailer Kohl's (KSS -3.38%) were down more than 13% this week. Much of that came yesterday, when the stock dropped 12.2%. Investors have been reacting to several items that point to a difficult environment, as well as a Bank of America analyst's take on the company. 

So what

Yesterday, analyst Lorraine Hutchinson moved her rating on the company down to what is effectively a sell recommendation, dropping her price target all the way to $48 per share, from a previous $75, as reported by Barron's. The analyst previously rated the stock a buy, resulting in a newsworthy double-downgrade. But the drop in the stock might have come less from the analyst's opinion alone as much as some evidence from a peer that her concerns are valid. 

retail shopper paying for goods with handbags and home goods displayed.

Image source: Getty Images.

Now what

Fellow retailer Bed Bath & Beyond reported its second-quarter financial results yesterday, and its shares tanked on the news. Bed Bath & Beyond missed its own expectations when it reported a net loss of $0.72 per share on revenue of $1.99 billion, which represented a 26% drop compared to the year-ago period. Adjusted earnings were $0.04 per share compared to analyst expectations of $0.52 per share. Management spoke of a "challenging environment" that included supply chain constraints. 

Those same supply chain issues are what Hutchinson said "could hinder Kohl's sales recovery." In its earnings conference call with investors, Bed Bath & Beyond CEO Mark Tritton blamed "external disruptive forces" for its shortfall in the quarter. Those forces included the latest surge in COVID cases from the fast-spreading delta variant, he said, as well as "worldwide freight shortages and port disruptions" caused by pandemic-related disruptions. 

Those issues have led to higher input costs and longer lead times for materials. And seemingly they are not isolated to just a single retailer. Investors are becoming negative on the sector with these headwinds. Having an analyst resort to a sell rating at the same time that another retailer provides evidence supporting her concerns has led to Kohl's shares moving down this week, too. 

Bank of America is an advertising partner of The Ascent, a Motley Fool company. Howard Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

Kohl's Stock Quote
Kohl's
KSS
$27.47 (-3.38%) $0.96

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