Brick-And-Mortar Retail Is Not Dead Just Yet

Now that we’ve entered the age of e-commerce, brick-and-mortar retailers are dying a slow death. The only problem for investors in Q2 is that somebody forgot to tell the retailers that premise.

Best Buy Co Inc (NYSE: BBY) led a pack of brick-and-mortar retailers that delivered big earnings beats in Q2, and the market is taking notice.

In addition to Best Buy, the following names likewise impressed the market with their Q2 numbers:

• Macy’s Inc (NYSE: M).
• Urban Outfitters, Inc. (NASDAQ: URBN).
• Nordstrom, Inc. (NYSE: JWN).
• J C Penney Company Inc (NYSE: JCP).

In fact, all stocks mentioned above are up between 8.9 percent and 26.2 percent in the past month alone — on the strength of their respective quarters.

Does Shorting Have Anything To Do With It?

A large part of those huge moves could be short covering. In the two years prior to August, each of these brick-and-mortar retailers lagged the S&P 500. Macy’s and Nordstrom were both down more than 36 percent. Even the top performer of the group, Best Buy, delivered only a 4.6 percent gain, less than half the gain of the S&P 500 during that two-year stretch.

These stocks that have been dead in the water for so long have really shown some signs of life since earnings season began. However, one quarter does not make a trend, and they are going to have to keep the momentum going before proving their long-term viability as long-term investments once again.

Remember, retailers’ most important part of the year is on the horizon. Come holiday shopping season, these strong Q2 numbers will be long forgotten, and these retailers will have to prove that they can deliver when it counts the most.

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