Hollywood Entertainment Corp., the fast-growing video chain based in Oregon that has been getting lots of hype as the successful counterpart to troubled rival Blockbuster Entertainment Group, stumbled Monday when the company disclosed its sales would be less than expected. The news sent the company's stock into a tailspin, plunging 26% to close at $12.06 a share in over-the-counter trading, half of what it was trading at last spring.
Analysts scrambled to revise earnings estimates, with brokerages such as Raymond James Financial downgrading the company's stock from a "buy" to "neutral."
In the wake of the problems at Blockbuster, Hollywood Entertainment has been enjoying a lot of good publicity as it expands rapidly in areas such as Southern California. Analysts believe Monday's announcement shows that the company's expansion is costly, that the video industry's overall softness lingers and that competition in the industry remains ever fierce.