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