As of early Friday morning, shares of retailer Kohl's (KSS -0.47%) 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.
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.
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.