Multimedia entertainment superstore retailer Hastings Entertainment (NASDAQ:HAST) reported today that revenue was up 2% and earnings were a negative $0.34 for the latest quarter, ended Oct. 31. Yet, in early trading, the shares were up 26%.

What got investor so stoked? Hastings raised guidance for 2003 (which ends Jan. 31, 2004) from a range of $0.27 to $0.32 to $0.45-$0.50 a share. That is certainly fantastic news. It means that the stock, which closed at $3.68 on Friday, was trading for an extremely low eight times earnings. The stock market corrected that low valuation with a vengeance this morning.

Is Hastings worth a further look?

Hastings operates entertainment superstores in small to medium-sized markets. The logic was to bring entertainment, from books to video to games, under one roof to markets that are typically underserved from a service and price perspective. With 150 superstores, Hastings is finally starting to get profitable traction again.

The earnings guidance was not all good news, however, with the CFO cautioning that "although most forecasters are projecting a robust holiday season, we remain concerned about sales for the holiday season, particularly rental revenue, and this concern is a factor in our guidance."

The company's quarterly report also included a cash flow statement. Good show, Hastings (we wish all companies released a cash flow statement when they released earnings). Further, the Investor Relations section of the report gives a candid view of the company that most enterprises would avoid. The "Advanced Fundamentals" portion shows the company has a five-year annual earnings growth rate of a negative 18%. Based on today's earnings guidance, the company is working hard to correct that performance.

All-in-all, Hastings is worthy of consideration. Including today's early morning gains, the market capitalization is a modest $52 million -- but that is still down 6.3% for calendar year 2003. Debt is high at $49 million. The all-time closing high of $19.12 was set November 1998. The all-time closing low of $1.37 was set December 2000.

Hastings' report may give owners of Blockbuster (NYSE:BBI) pause. Hastings is seeing a drop-off in video rentals. It certainly looks like companies such as Netflix (NASDAQ:NFLX) are finally starting to steal sales from brick-and-mortar retailers. Owners of Best Buy (NYSE:BBY) and Time Warner (NYSE:TWX) may also want to take note, too. Hastings' music sales were down 6.3% for the latest quarter.

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W.D. Crotty does not own any of the stocks mentioned in this article. You can e-mail W.D. at .