TLDR
- Kohl’s stock jumped 37% on Tuesday with trading halted for volatility, reaching highs over $21 before settling
- The stock doubled in premarket trading before gains were wiped out, following the Opendoor meme stock pattern
- Reddit’s WallStreetBets forum targeted Kohl’s due to its 49% short float and name recognition among retail traders
- Trading volume reached 17 times the 30-day average with no corporate news driving the surge
- The company expects same-store sales to drop 4-6% in fiscal 2025 while operating under interim leadership
Kohl’s became the latest casualty of meme stock mania on Tuesday. The department store chain saw its shares rocket 37% higher in wild trading that forced the New York Stock Exchange to halt activity.
The stock opened around $10.70 in premarket trading. It then soared to highs of $21.39 before reality set in.
Trading was paused for volatility as retail investors piled into the beaten-down retailer. The surge followed a similar pattern to Opendoor, which became a meme stock darling earlier this week.
By late morning, Kohl’s trading volume hit nearly 17 times its 30-day average. The frenzy had all the hallmarks of coordinated retail trading.
No corporate announcements or analyst upgrades triggered the move. Instead, Reddit’s WallStreetBets forum lit up with discussion about the stock.
Short Squeeze Setup
Kohl’s presents an attractive target for meme stock traders. The company has a 49% short float, meaning nearly half of available shares are being bet against.
This heavy short interest creates potential for a squeeze. When retail traders buy heavily shorted stocks, short sellers may cover their positions by purchasing shares.
The buying pressure can drive prices higher in a feedback loop. Kohl’s name recognition makes it appealing to everyday investors who remember shopping there.
“There’s a lot of irrational exuberance around the stock,” said Neil Saunders of GlobalData. “It’s a very similar thing to what we saw with Bed Bath and Beyond back in the day.”
The stock has fallen from post-pandemic highs around $60. It hit a 52-week low of $6.04 in April.
Business Struggles Continue
Behind the trading excitement sits a struggling retailer. Kohl’s reported a 6.7% same-store sales decline in its fourth quarter.
Net sales totaled $5.2 billion in the quarter. The company’s stock dropped 24% following that earnings report in March.
Former CEO Ashley Buchanan announced turnaround plans focused on core areas. These included Sephora beauty products and value items for existing customers.
But Buchanan was removed in May over an ethical breach. The conflict involved a vendor contract issue.
Board chair Michael Bender now serves as interim CEO. The leadership change adds uncertainty to an already challenging situation.
First quarter results showed same-store sales fell 4.1%. Net sales reached $3 billion during the period.
The company faces rising competition and changing shopping habits. Its sprawling network of over 1,100 stores requires expensive maintenance.
Kohl’s has been the subject of takeover offers and activist campaigns. Some analysts have placed it on bankruptcy watchlists.
The retailer expects same-store sales will drop 4-6% in fiscal 2025. Total sales are projected to fall 5-7% for the year.
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