Reddit, Kohl’s Meme Stock And Short Sellers See Retailer’s Shares Soar

Welcome back to meme retail share time, as department store retailer Kohl’s meme stock became the latest unlikely name to unexpectedly and suddenly surge Tuesday.

At its height, the retailer’s stock more than doubled from Monday’s close of $10.42 per share, only to see a lot of those gains wiped out as markets opened, with trading in the stock temporarily suspended at one point Tuesday morning.

But at the shakeout, shares still closed about 37% higher on the day, on trading volumes of over 184 million shares, almost 17 times more than the average over the past 30 days.

That meant that the heavily shorted stock, which went public in 1992, recorded its largest-ever daily percentage increase, overtaking the 36% seen on January 24 2022 ,and has also run upward over two-thirds so far in July, which puts it on track to break the record for monthly gains of 51.2% it saw in November 2020.

So why has Kohl’s become the latest meme stock and why has retail been at the heart of many such runs?

Firstly, it could be a product of the fact that the stock market has pushed into record territory and bargains have become much harder to find, prompting investors once again to turn to some of Wall Street’s beleaguered legacy companies in the hope of a quick win.

And in such febrile conditions, and devoid of corporate announcements to boost its share value, Kohl’s has got all the hallmarks of a meme stock. The retailer operates as a so-called legacy department store that has around 1,100 stores nationally, making it familiar to retail stock investors.

It also means Koh’s is sitting on a lot of expensive real estate, with high costs, in a market that has become ever more competitive and has seen many of its peers go to the wall.

Kohl’s Meme Stock Shorted

Short interest as a percentage of Kohl’s public float of shares sits at around 49.3%, compared with the 21.4% at another of this week’s meme stock companies, Opendoor, against its public float.

Over recent years Kohl’s has also been the subject of takeover offers, activist campaigns and bankruptcy watchlists as it wrestles with the modern-day retail landscape – all encouraging a sense of volatility.

All that makes it’s a poster boy as a potential meme stock, which typically start as the target of short sellers, or investors betting against the stock. If other investors start buying the shares and boost the price, that can often prompt the people betting against the stock to buy more shares in an effort to cushion their own losses.

This can lead to ‘hockey-stick’ increases in a company’s shares even as it loses money, with retail investors in pursuit of a quick killing pile into the stock to try and ride the wave, suhc as Bed Bath & Beyond in 2023.

And this time round its Kohl’s stock that has been the subject of debate on forums such as Wall Street Bets on Reddit, which became notorious and the subject of a movie after the famous GameStop short squeeze in 2021.

Kohl’ Meme Stock Vs Performance

Beyond its share price, Kohl’s business has been struggling for a number of years. Its sales are falling, it faces rising competition, and it is currently led by an interim CEO after its former CEO Ashley Buchanan was ousted over a conflict-of-interest scandal.

For the quarter ended 3 May, Kohl’s reported net sales down 4.1% and comparable sales off 3.9% under the leadership of Michael Bender who has taken over as Kohl’s Interim Chief Executive Office.

Looking ahead, for the full year Kohl’s forecast net sales down 5-7% and comparable sales off 4-6%. Hardly the stuff of retail surges.

As markets prepare to open, Kohl’s meme stock status can expect to be back in the eye of the storm once again.