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Why Did Nordstrom, Inc. Shares Jump 20% in August?

By Daniel B. Kline - Sep 11, 2018 at 3:04PM

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The company has proven to be a retail success story.

Nordstrom (JWN -6.41%) had a good quarter and raised its forecast for the full year. That's a combination that investors generally like, and shares in the company rose significantly after the company reported.

What happened

The retailer reported that sales rose by 7.1% in the second quarter compared to the same period a year ago. Comparable-store sales also rose by 4% year over year, and digital sales were up 23% compared to the same period in 2017 (when digital sales were up 20%).

Nordstrom's earnings per share rose as well, coming in at $0.95, up from $0.65 last year and ahead of the company's expectations. Because of that, the department store chain raised its 2018 earnings-per-diluted-share expectations to $3.50-$3.65 from $3.35 to $3.55.

A Nordstrom Rack store

Nordstrom also operates a discount brand. Image source: Nordstrom.

So what

Nordstrom has cemented the fact that it's one of the winners in the so-called retail apocalypse. The chain has clearly figured out a formula that works; it's possible that its results will continue to improve as competitors' results falter.

Investors clearly like what they see. After closing July at $52.41, shares in the company rose to $62.85 to close out August, a nearly 20% increase, according to data provided by S&P Global Market Intelligence.

Now what

When a company raises its forecasts, it then ends up being under pressure to deliver on those projections. Nordstrom still faces a fourth quarter where retailers -- even very successful ones -- can get tripped up in a very competitive environment. There's no reason, however, to believe that will happen. Instead, the company looks like it's delivering on its promises and has built a solid model for the future.

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