Hastings Entertainment posted a net income of $5.1 million, or 45 cents per diluted share, on revenues of $174.2 million in the three-month period ended Jan. 31. That was down 26.3% from the $7 million in net income, or 61 cents per diluted share, generated last year in the same time period when sales were $145.8 million.

Hastings chairman/CEO John Marmaduke says the company was disappointed with results, attributing the shortfall to a highly promotional environment and company merchandising initiatives that fell short of expectations.

The Texas-based company runs 154 superstores that average 20,000 square feet, combining book, music, movies, and video game inventory.

For the fiscal fourth quarter, Hastings turned in a 1.1% comparable-store gain -- one of the few merchants to attain a positive sales ratio in the home entertainment software sector during the period.

For the full year, the company reported $5 million in net income, or 44 cents per diluted share, on sales of $548.3 million. That was down from the $5.7 million generated in the previous fiscal year when sales were $444.3 million.

The company managed to garner a comparable store gain of 1.8% for the year. Within that, music was down 6.2% due to a lack of new releases. Books sales were flat although mass-market paperback books and the used category helped offset the lack of new hardcover releases. Video sell-through increased 12.9% due to a strong release schedule. Video games were up 9% thanks to new platforms. Sidelines were up 1.4%. And video rentals, which account for 17% of total revenue, increased by 0.2%.

Gross profit decreased by almost one percentage point down to 34.4%, while selling, general and administrative expenses decreased to 32.4% from 32.8% of revenue.

At the end of the year, the company posted shareholders equity of $94.7 million. Shares closed at $6.30, giving the company a market capitalization of $69.6 million.