Kohl’s saw its shares surge on Tuesday, which analysts attribute to a Reddit-fueled “short squeeze,” making the department store chain the latest in a list of so-called “meme stocks,” Bloomberg reported.
Newsweek reached out to Kohl’s outside of regular business hours for comment.
Why It Matters
Tuesday’s rally occurred despite no announcements or news from Kohl’s. It follows a challenging period for the company, marked by declining sales, abrupt changes in leadership and ongoing uncertainty surrounding the impact of tariffs on its business.
What To Know
Kohl’s share price more than doubled in premarket trading, pushing it to levels not seen in nearly a year, before opening up 87 percent. The unprecedented increase prompted a mid-session halt in volatility, or a “circuit breaker,” a temporary suspension of trading triggered by rapid price movements. Shares closed 36.6 percent higher.
Kohl’s shares had been climbing steadily since mid-April, rebounding from a monthslong decline that bottomed out after President Donald Trump announced reciprocal tariffs early that month. The stock is up 2.2 percent year-to-date, ahead of Wednesday’s market open.
The company has been battling weak sales and dealing with the fallout from firing its CEO over conflicts of interest earlier this year. In May, Kohl’s announced that net sales had declined 4.1 percent year-over-year in the first quarter. The company expects sales to fall by between 5 and 7 percent for the full fiscal year, and comparable sales to decrease by between 4 and 6 percent.
Analysts are linking Tuesday’s rally to heightened interest in the stock in online forums, particularly the r/WallStreetBets forum on Reddit. This was made famous during the GameStop short squeeze in 2021, during which a large group of retail investors bought the stock after noticing an outsized percentage of its shares were shorted by hedge funds who had bet on the price to fall.
Some have already drawn parallels between this case, which saw institutional investors lose billions, and Kohl’s Tuesday surge.
According to data from S3 Partners LLC, cited by Bloomberg, around 48 percent of publicly tradable Kohl’s shares have been borrowed by investors for short selling. This makes Kohl’s one of the most shorted stocks, a fact that Redditors have pointed to for months as an opportunity for a potential “squeeze,” a coordinated buying effort that forces short sellers to buy back their stocks at higher prices, adding extra demand and pushing the price even higher.
What People Are Saying
Interactive Brokers Chief Strategist Steve Sosnick told Bloomberg: “It’s all social media chatter. Remember that a highlight of the meme stock era was a dose of nostalgia for companies like GameStop and AMC.”
“Social media chatter can become self-fulfilling,” he added.
GlobalData Managing Director Neil Saunders told CNBC: “There’s nothing really that Kohl’s has done to fundamentally earn this level of increase. The business fundamentals remain quite weak.”
What Happens Next
Kohl’s shares were priced at $14.34 as of Tuesday’s close. Analysts’ price targets for the stock range from $4 to $9, according to MarketWatch, with a median target of $8.
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