Shares of Nordstrom Inc soared more than 32% on a faster-than-expected recovery at the company's off-price Rack outlets that raised hopes about the department store's ability to stanch further marketshare losses to bigger rivals.

The company wrestled with severe shortages of women's apparel and shoes at Rack stores for most of last year, with management blaming the underperformance to faulty internal inventory decisions as much as wider supply-chain issues.

Fourth-quarter sales at Rack improved 320 basis points sequentially, with Chief Executive Officer Erik Nordstrom saying the business was well on its way to recovery as the department store boosts inventory and pushes for higher-priced products to bolster margins.

"We have a lot of effort going on in our Rack business... we like our plans and believe there's opportunity for continued improvement there," Nordstrom said on an analyst call.

Wall Street was also impressed with how the business was bouncing back, given that its issues were in part responsible for a string of disappointing quarterly results from Nordstrom in 2021 and the company sliding further behind chief rivals Macy's Inc. and Kohl's Corp.

Nordstrom's shares have lost nearly half their value in the last 12 months, while those of Macy's have gained roughly 60%.

"While it is still early stages, we are encouraged by the initial improvement driven by a better in-stock positions," Cowen & Co. analysts said in a post-earnings note, raising its price target by $5 to $30.

At least five other brokerages also raised their price targets as the company joined Macy's and Kohl's in giving a rosy 2022 sales outlook on the back of a strong recouping in demand at department store chain from pandemic lows.