What happened

Shares of Nordstrom (NYSE:JWN) were up 2.8% on Monday after a Morgan Stanley analyst reiterated her hold rating on the stock, but set her price target at $21 a share, some 30% above its current price.

So what

The department store chain reported a massive $521 million first-quarter loss last week as the coronavirus pandemic took its toll, with sales plunged 40% to about $2 billion. It had to clear out merchandise at fire-sale prices, resulting in inventory levels falling 25% year over year. That let it look to the coming quarters with something of a clean slate now that its stores are reopening.

Artist rendering of a Nordstrom store

Image source: Nordstrom.

Now what

No one was expecting any retailer to report good results this past quarter, and Nordstrom didn't surprise in that regard, yet the chain has sufficient liquidity to finance a comeback with approximately $1.4 billion in cash. 

It will emerge from the pandemic as a leaner operation after closing 16 underperforming stores, and will also face less competition as a number of competitors have filed for bankruptcy. Others, such as Lord & Taylor, intend to liquidate their stores upon reopening.

Because Nordstrom has a developed e-commerce platform, had previously advanced plans to shift business from shopping malls (which are dying venues), and is focused on operating a smaller business, it is poised to make a recovery. But it may be several quarters before that materializes.

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