Shares of upscale retailer Nordstrom (NYSE:JWN) surged on Tuesday morning, as investors grew more optimistic after the company announced a series of measures to protect its cash position through the coronavirus shutdown.
As of 12:15 p.m. EDT, Nordstrom's shares were up about 20% from Monday's closing price.
In a statement released after Monday's market close, Nordstrom said that it is taking a series of measures to bolster its balance sheet, including:
- Borrowing $800 million from its existing revolving line of credit.
- Suspending its quarterly dividend starting in the second quarter of fiscal 2020.
- Suspending its share-buyback program.
- Aiming to cut an additional $500 million in costs, above its existing plan to cut between $200 million and $250 million in fiscal 2020.
The company also said that, while it has no immediate need to raise additional cash, it may look to raise additional capital at some point in the not-too-distant future.
Nordstrom noted that these moves will bolster an already-solid cash reserve, $853 million as of Jan. 31, the end of its 2019 fiscal year.
Nordstrom should now have enough cash to ride out an extended shutdown. The company closed its brick-and-mortar stores on March 16, and its ability to continue online sales is in question. (State-level stay-at-home orders in California and Pennsylvania will likely shut down two of its three fulfillment centers; the third is in Iowa, which may also shut down soon.)
The question for CEO Erik Nordstrom (and Nordstrom's investors) is this: If the U.S. and Canada emerge from the pandemic in a deep recession, does the company have the reserves to ride that out as well?
That question probably helps explain Monday's moves. If Nordstrom taps the public markets at some point in the near future, we'll have another answer.