What happened

Shares of Nordstrom (NYSE:JWN) lost 25.5% in value last month, according to data from S&P Global Market Intelligence.

The department store delivered lower-than-expected earnings results for the fiscal second quarter in late August. The weak results, along with the pullback in the broader market last month, sent the shares tumbling.  

The interior of a department store.

Image source: Getty Images.

So what

Sales in the second quarter were down 53% year over year. Investors are concerned about the company's near-term prospects given the weakened economy, which has put more pressure on struggling department stores. Stores were closed for approximately 50% of the operating days during the quarter. 

Despite the weak environment, management has lowered inventory by more than 25% and reduced costs. This led to improved merchandise margins and contributed to positive operating cash flow of $185 million for the quarter. 

Now what

While the near term will be challenging, President Pete Nordstrom said, "We're confident that we can improve sales trends in the second half of the year and beyond." 

On a bright note, Nordstrom may be positioned to take market share from other retail stores that are in even worse shape. Nordstrom's advantage is the investments made in the e-commerce channel. Digital sales grew by approximately 20% in the second quarter excluding the impact of the anniversary sale shift. 

"With the resetting of our base cost structure, we have become leaner and more efficient," CEO Erik Nordstrom said during the second-quarter conference call. He added, "We expect to deepen our relationships with existing customers and attract new ones, driving market share gains and profitable growth."