Shares of newly spun off Kontoor Brands (KTB) dropped more than 4% on Thursday after Bank of America/Merrill Lynch initiated coverage of the Lee- and Wrangler-brand jeans and clothing maker with an underperform rating.

Shares of Kontoor fell 4.29%, or $1.34, to $29.91 on the New York Stock Exchange after Bank of America/Merrill Lynch initiated coverage with an underperform rating and a 12-month price target of $24.

"We expect multiple contraction as growth misses plan due to a tough retail environment and underinvestment in the Lee and Wrangler brands," the bank said in a note to clients. 

Scott Baxter celebrates launch of @KontoorBrands (NYSE: $KTB) and rings The Opening Bell https://t.co/mGuGKGIIbK

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"We think a discount is warranted given our outlook for below peer growth and because we think the company is over-earning in the near-term."

Kontoor, which includes the Wrangler, Lee and Rock & Republic denim brands as well as the VF outlet business, was spun off from VF Corp. (VFC) on May 23. VF Corp. is the parent company of apparel brands Vans, The North Face and Timberland.

Shares of Kontoor Brands closed at $31.38 on Wednesday. The company officially began trading as an independent, publicly traded company on May 23. Its stock has dropped by about 12% since then.