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Why Nordstrom Stock Rose 17% in August

By Demitri Kalogeropoulos – Sep 6, 2020 at 10:16AM

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Investors are hoping that the worst of the pandemic's impact is now behind the retailer.

What happened

Nordstrom (JWN 1.58%) shareholders outpaced a booming market in August. The stock jumped 17% compared to the S&P 500's 7% increase, according to data provided by S&P Global Market Intelligence.

That rally only erased a small portion of the losses that the department store has posted this year, though, and shares remain lower by more than 60% in 2020.

A shopper holding bags on a mall escalator.

Image source: Getty Images.

So what

Nordstrom said late in the month that second quarter sales and earnings plunged as roughly half of its store base remained closed during the period due to COVID-19 restrictions. Revenue was down 53% and pre-tax losses landed at $255 million.

Investors were pleased to hear about the chain's declining expense base and the fact that it achieved positive cash flow even though its stores were open for only about half of the second quarter. Nordstrom isn't burdened by excess inventory as it heads toward the holiday shopping season, either.

Now what

CEO Erik Nordstrom and his team said they're confident that conditions are ripe for major improvements in both sales trends and profitability during the second half of 2020. Yet it's still an open question about what level of growth and earnings power the chain can reach even assuming it successfully navigates the retail industry shakeup that's likely to stretch on into next year.

Demitri Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool recommends Nordstrom. The Motley Fool has a disclosure policy.

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