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Sent on Mormon-News: 19Sep01

By Kent Larsen

Hollywood Entertainment Fighting Investor Fears

PORTLAND, OREGON -- Mark Wattles, the LDS CEO of video rental chain Hollywood Entertainment, is fighting misconceptions among investors and trying to lift his company's stock price. Over the past two weeks Hollywood Entertainment's stock has fallen more than 25% after rival Blockbuster devalued its inventory because of the increasing popularity of DVDs. Investors have assumed, erroneously according to Wattles, that Hollywood Entertainment needs to devalue its inventory also.

Blockbuster's move two weeks ago acknowledged that the resale value of VHS cassettes was dropping because consumers would rather purchase DVDs. That move led its stock to drop 15%, and investors assumed that Hollywood Entertainment would also need to devalue its inventory, leading them to pay less for its stock. But Hollywood Entertainment Chief Financial Officer James Marcum says that the company already made that move nearly a year ago, months before Blockbuster, "I want to remind our investors that, as a result of the forecasted migration from VHS rentals to DVD, the Company accelerated the depreciation of its VHS rental inventory in the fourth quarter of 2000 and took a charge at that time."

Today, Wattles tried to assure investors that the company was on track, "Our business continues to perform well in the third quarter. Positive trends that began in the second quarter have continued through the current week. We are confident that we will meet or exceed our previously announced forecast of 4-5% same store sales increase for the third quarter."

The company's stock price has recovered in recent months, even as the overall market has fallen. The stock reached a low of just about $1 a share in January, and has since reached a recent high of about $12 a share. In trading today, the stock rose $2.01 to close at $9.90 a share.


Hollywood Entertainment Responds to Investors' Questions Regarding Valuation of Inventory
Hollywood Entertainment Corporation Press Release 17Sep01 B4


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