Jim Cramer advises Kohl’s short sellers to ‘take their losses and move on’

Cramer Warns Against Shorting Kohl’s Stocks

Jim Cramer from CNBC offered a cautionary note on Tuesday regarding short-selling strategies, specifically mentioning Kohl’s and drawing parallels to GameStop’s past scenario.

“Short-sellers overstepped their boundaries with Kohl’s and might find themselves in hot water,” he remarked. He suggested it would be prudent for these investors to close their positions before encountering another situation like GameStop.

Kohl’s experienced a tumultuous trading day, with fluctuations causing temporary halts in the morning session. Ultimately, the stock surged by 37.62%. According to data from Factset, about 50% of Kohl’s sales are attributed to its products.

Short selling involves investors borrowing stocks to sell at a higher price, aiming to repurchase them at a lower price later, thereby pocketing the difference.

Cramer pointed out that investors seem to have overlooked Kohl’s potential, particularly its partnership with cosmetics giant Sephora. Instead, the current focus appears to be on the significant short positions held against the stock.

He noted that when a stock has a substantial short position, it becomes easier for buyers to band together online and create a short squeeze, similar to what happened with GameStop. Cramer referred to discussions around department stores that emerged on the WallStreetBets forum, which gained notoriety for its role in the GameStop saga in 2021, labeling Kohl’s as an ideal candidate for such trading strategies.

Cramer also critiqued Kohl’s financial health, asserting that it doesn’t support such high short positions. “The company may not be doing wonderfully, but it has its strengths,” he remarked, implying that short sellers missed an opportunity to exit their positions back in the spring when market responses to new tariffs caused stock prices to dip.

In closing, he reflected on the misguided objectives of short sellers. “This is a company experiencing a downturn and burdened with debt, but it isn’t collapsing. Hedge funds really should consider covering their shorts and moving forward.”