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 - Get Report) 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.