AMARILLO, Texas, March 28, 2001--Hastings Entertainment, Inc. (NASDAQ: HAST), a leading multimedia entertainment superstore retailer, today reported final fourth quarter and fiscal year results for fiscal 2000. Results were highlighted by pre-tax income for the quarter ended January 31, 2001 of $3.9 million or $0.33 per diluted share compared to a pre-tax loss of $4.9 million or $0.42 per share for the comparable quarter in the previous year..

“During the fourth quarter of fiscal 2000, our recent strategic moves began to positively impact our financial results,” said Hastings Entertainment President and Chief Executive Officer John Marmaduke. “We believe our commitment to improving efficiencies, the store model, product margins, and enhancing customer satisfaction will increase profitability and shareholder value for years to come.”

Fourth Quarter 2000 Results

Net income for the quarter was $0.2 million, or $0.02 per diluted share, compared to a net loss of $3.0 million, or $0.26 per share, for the same period last year.

During the fourth quarter of fiscal 2000, we reviewed the net deferred tax asset under the provisions set forth in Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109). “While we believe the entire deferred tax asset will be realized by future operating results, due to the cumulative losses incurred in recent years the deferred tax asset does not currently meet the stringent criteria for recognition under SFAS 109,” stated Dan Crow, Vice President – Finance and Chief Financial Officer. “As a result, we incurred a $3.7 million charge bringing our valuation allowance to 100% of our deferred tax asset. In the future, we will continue to evaluate the potential realization of our deferred tax asset.”

Total revenues for the quarter decreased approximately 1% from $142.7 million to $141.3 million. While comparable store revenues were essentially flat, we closed two under-performing locations ending the quarter with three fewer superstores compared to the same quarter last year.

Total gross profit, as a percent of total revenue, increased to 32.6% compared to 27.8% for the same period last year. The increase was primarily due to a reduction in the expense associated with return of inventory from $5.7 million to $1.1 million. The reduction is the result of our focus to improve the timing, execution and reconciliation of returned inventory. Other areas effecting the increase in gross margin include (i) the expense associated with the markdown of inventory was reduced from $2.9 million to $1.9 million as we implemented new inventory systems and programs to address under-performing inventory in an expeditious manner, and (ii) a reduction in shrinkage of $1.8 million quarter-to-quarter resulting from an increased focus on loss prevention. The above increases were offset by a $0.7 million net decline in margin as a result of increased product costs and freight costs as vendors added fuel surcharges to their cost schedules.

Selling, general and administrative expenses decreased to 29.3% of total revenues for the quarter compared to 30.4% for the same period last year. During the quarters ending January 31, 2001 and 2000, we recorded reserves for the planned closing of certain superstores. During the fourth quarter of fiscal 2000, we recorded $1.3 million in net increases to the reserve for four superstores identified for closure compared to $2.5 million for six superstores identified during the fourth quarter of fiscal 1999.

“Overall, we are pleased with the progress we made during the fourth quarter,” added Mr. Crow “Despite a difficult holiday season for retailers, Hastings maintained a strong margin from its core products and began to recognize benefits from management’s focus on our inventory cost model.”

Fiscal Year 2000 Results

Total revenues for fiscal year 2000 increased 2.9% to $458.2 million from $445.4 million for fiscal year 1999. Comparable store revenues remained flat for the period and we ended the current year with 142 superstores compared to 147 superstores one year earlier. For fiscal year 2000, we incurred a net loss of $14.6 million, or $1.25 per share, compared to a net loss of $2.2 million, or $0.19 per share for fiscal 1999. The increased net loss resulted from a decline in gross profit as a percent of total revenue from 32.1% in fiscal 1999 to 30.5% in fiscal 2000 principally arising from margin declines, and increases in selling, general and administrative expenses from 31.7% for fiscal 1999 to 32.5% for fiscal 2000.

The margin declines were the result of a series of factors. During the first quarter of fiscal 2000, management determined a need to improve inventory turns in order to enhance cash flow, reduce markdown expense, and enhance our inventory offering. Our resulting implementation of an initiative to permanently improve inventory turns generated an increase in the volume of returns to vendors and markdowns as well as compressed the timing of these returns resulting in higher fees per return based on the pricing agreements with our vendors. This negatively impacted gross profit by a $4.2 million increase in the cost associated with the return of product.

In addition, lower than anticipated sales volume for certain products in the first three quarters of fiscal 2000 resulted in management’s decision to increase the markdown frequency on certain products to stimulate sales, increase inventory turnover and improve cash flows. Such markdowns resulted in lower merchandise margins of approximately $3.3 million and an increase in lower of cost or market inventory adjustments of $0.9 million compared to the prior year. Margins were also adversely affected by an increase in freight costs of $1.0 million for the year ended January 31, 2001 due to freight carriers adding fuel surcharges of 4% to 8%.

Also contributing to the overall decrease in margin was a decline in rental video margin of approximately $3.6 million primarily as a result of (i) an increase in rental video revenue subject to revenue-sharing agreements with studios as a percent of total rental video revenue, which has lower profit margins, and (ii) gross profit margin on traditional rental video was higher in fiscal 1999 as compared to fiscal 2000, which related to a change in method of amortization as discussed in our annual report on Form 10-K for fiscal 1999.

Offsetting the declines in margin outlined above was a reduction of shrinkage of approximately $2.9 million resulting from an increased focus on loss prevention. In addition, we recorded an increase of $2.3 million in purchase discounts due to more advantageous buying and improved seasonal terms from our vendors during the year.

The increase in selling, general and administrative expense was primarily the result of $2.7 million in accounting and legal fees associated with the restatement of the first three quarters of fiscal 1999 and the prior four fiscal years as described in our annual report on Form 10-K for fiscal 1999.

Pre-opening expenses were $33,000 for the year ending January 31, 2001, as we opened one superstore during the year. For the year ending January 31, 2000, pre-opening expenses totaled $1.7 million with the opening of 20 new superstores.

Balance Sheet Information, Cash Flow and Other Ratios

(dollars in thousands, except per share amounts)

Merchandise inventories, net Inventory turns, superstores Long-term debt Long-term debt to total capitalization Cash flow from operations Cash flow from operations per share Book value Book value per share Weighted average shares outstanding

January 31, 2001 $ 130,676 2.18 $ 29,610 28.1% $ 52,185 $ 4.48 $ 75,790 $ 6.51 $ 11,645,318

January 31, 2000 $ 152,065 1.89 $ 54,260 37.6% $ 39,517 $ 3.40 $ 90,091 $ 7.75 $ 11,620,956

Comparable store revenue increase Gross margin percentage Operating income percentage Earnings per share Weighted average shares outstanding New stores

4.0% 31.2% 1.4% $ 0.40 11,900,000 Seven

Hastings also operates www.gohastings.com, an e-commerce Internet Web site that makes available to its customers new and used entertainment products and unique, contemporary gifts and toys. The site features exceptional product and pricing offers.