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The Honolulu Advertiser
Posted on: Thursday, August 23, 2001

Brick-and-mortar stocks getting last laugh

USA Today

Just 18 months after enduring repeated predictions the Web would lead to their demise, old-line companies are enjoying some good old-fashioned revenge.

Not only did they avoid extinction, but their stocks are outperforming as investors regain appreciation for companies with established track records.

In fact, stocks punished not long ago for "not getting it" online are scoring gains while the Standard & Poor's 500 and Nasdaq composite indexes are down sharply this year, says David Sowerby, portfolio manager at Loomis Sayles.

Take Barnes & Noble and Borders. Shares of the bricks-and-mortar booksellers are up 54 percent and 98 percent, respectively, this year. Amazon: down 34 percent.

Other Old Economy sectors that are back and thriving:

• Grocery stores. Albertson's shares are up 31 percent to $34.60 this year as investors have realized a mostly traditional grocery store is good business. Meanwhile, online grocery Webvan has folded.

In its small Net business, Albertson's fills online orders in Seattle from store shelves instead of setting up Webvan-like warehouses.

• Software retailers. Electronics Boutique, which sells video-game software from stores in malls, has seen its stock double to $34.99.

Consumers were supposedly going to download software or buy e-tail. But online software sellers Egghead and eToys are the ones folding or filing for bankruptcy.

Electronics Boutique's Web site brings in just 3 percent of the company's revenue.

• Pet stores. All that's left of Pets.com is its Sock Puppet mascot, but Petsmart shareholders are holding on to a stock that has more than doubled this year. Petsmart has a Web site, but revenue from its Internet and catalog businesses totaled just 5 percent of revenue.

• Financial advisers. H&R Block's stock is up 80 percent, even though taxpayers were supposedly going to do their taxes online. Meanwhile, Intuit, maker of leading TurboTax software and Web site, is down 9 percent, despite a surge yesterday.