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Guitar Center may be filing for bankruptcy


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This weekend I walked into the local GC just to see if any interesting used gear was there.  The floor usually has a lot of amps on shelves.  Not this time.  The higher end guitars were sparse as well.  Without having seen the article linked above the impression of a store closing came to mind.  The Christmas stock should be filling the store if GC does layaways. 

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                                                   There certainly have been rumors for years about them circling the drain. There was a posting on the topic on TGP recently IF your interested in further thoughts on the subject. https://www.thegearpage.net/board/index.php?threads/guitar-center-not-going-bankrupt.2196031/

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4 minutes ago, tbonesullivan said:

I would think the lack of walk in traffic has hit them pretty hard.

                                      One would think so as it has most everybody in business.....................they would be no different.

 

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1 hour ago, tbonesullivan said:

I would think the lack of walk in traffic has hit them pretty hard.

Guitar Center has its own web site for gear.  Then there is that tie with Musician's Fiend.  If online sales hurt that chain, they certainly have been in the online business in a big way. 

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At the risk of wandering into @Biz Prof's milieu, I think it is worth mentioning here that Guitar Center is owned by a private equity firm, Bain Capital, which is notorious for it's ruthless disregard of plowing profits back into the companies it acquires. Their Gordon Gecko Teldar Paper/ Bluestar Airlines strategy has destroyed a few American retail institutions such as Sports Authority, Burlington Coat Factory, Gymboree, Brookstone...and many more. And NO, i don't believe that Amazon delivered the death blow. While many of the products sold at these places can be purchased online sight unseen, like a book, we all know it is different for musical instruments, at least among anyone who has more than a beginners aptitude for playing. Guitars are very unique and personal, even among the same brand model. Are we going to turn  the world into Carvin?

That said, I usually get treated well at most GC's I wander into, but maybe that's just because I'm a middle aged guy that looks like he has money. The GC in Fairfax City VA let me absolutely BLAST an EVH head last year on a busy Saturday without any kind of rebuke. In fact, the salesman was cheering me on.

I will note that almost every person that I have ever met that worked at GC absolutely hated it. There was one on Oakland when I was living there 30 years ago, I had some friends that worked there and would just steal everything they could get out the door. Speakers, PUs, Amps, Guitars....it was like a fencing operation. They had so much contempt for the place.

I know we have some people here on the HFC that worked there....what is the story? What was the suckage?

Edited by Ed Rechts
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5 minutes ago, Ed Rechts said:

I know we have some people here on the HFC that worked there....what is the story? What was the suckage?

Beavis, that job sucked more than anything that has sucked before. 

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2 minutes ago, Ed Rechts said:

At the risk of wandering into @Biz Prof's milieu, I think it is worth mentioning here that Guitar Center is owned by a private equity firm, Bain Capital, which is notorious for it's ruthless disregard of plowing profits back into the companies it acquires. Their Gordon Gecko Teldar Paper/ Bluestar Airlines strategy has destroyed a few American retail institutions such as Sports Authority, Burlington Coat Factory, Gymboree, Brookstone...and many more. And NO, i don't believe that Amazon delivered the death blow. While many of the products sold at these places can be purchased online sight unseen, like a book, we all know it is different for musical instruments, at least among anyone who has more than a beginners aptitude for playing. Guitars are very uniques na dpersonal, even among the same brand model. Are we going to turn  the world into Carvin?

That said, I usually get treated well at most GC's I wander into, but maybe that's just because I'm a middle aged guy that looks like he has money. The GC in Fairfax City VA let me absolutely BLAST an EVH head last year on a busy Saturday without any kind of rebuke. In fact, the salesman was cheering me on.

I will note that almost every person that I have ever met that worked at GC absolutely hated it. There was one on Oakland when I was living there 30 years ago, I had some friends that worked there and would just steal everything they could get out the door. Speakers, PUs, Amps, Guitars....it was like a fencing operation. They had so much contempt for the place.

I know we have some people here on the HFC that worked there....what is the story? What was the suckage?

Bain Capital sold it to Ares Management back in 2014 https://www.latimes.com/business/la-fi-mo-guitar-center-completes-debt-swap-with-ares-management-20140403-story.html

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16 minutes ago, Carl.B said:

Ah, so THAT explains why GC is still alive. They have been rumored to be going under since the recessions of the early 2000s. Had they not moved to Ares, you gotta know they'd be a memory by now.

Sam Ash is long gone, right? What other "big box" music retailers are there anymore, with bricks and mortar?

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My wife use to work for Best Buy Cooperate HQ when they tried selling musical equipment. One of the reason's they got out of it was how Fender, Gibson, and  almost all other music suppliers deals were struck. They found out quick that selling TV's, Computers, Appliances and electronics was a much easier way to go.

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46 minutes ago, Ed Rechts said:

Sam Ash is long gone, right?

Sam Ash is still around--at least for now.  In north Raleigh, the Sam Ash (nee Mars Music) and GC stores are literally across the highway from each other.  They are largely the same in terms of guitar/amp/effects inventory, but the Sam Ash outlet has a much more robust accessories and parts offering.  I tend to find the Sam Ash staff more friendly and helpful, as well.  Perhaps that is a reflection of the Sam Ash work culture vs that of GC.

1 hour ago, Carl.B said:

Bain Capital sold it to Ares Management back in 2014

Yep. When that deal went down, it was a clear signal to me that Bain's managers felt like their original profitability expectations for GC were a moon shot. Based on what was being reported at the time, I surmised that GC's debt ratios were so bad (exceptionally high risk levels, even for retail) that to hold on to its interest in the firm was either corporate suicide or fiscal malpractice. It's one thing to be highly leveraged if you have some criminally undervalued assets that can be sold in pieces or repackaged and marketed for a wicked profit (think: Disney's movie vault and intellectual property back in the mid/late '80s), but when you really think about it, just WTH were/are the assets that GC has that could be easily sold at a fat profit?  Before its acquisition by Fender, Kaman Music Corp. had assets, namely a well-established distribution/sales network (likely undervalued on KMC's books) and some good brands/product lines (possibly overvalued on KMC's books).  In retrospect, it's obvious that FMIC was smitten by the former and generally uninterested in the latter.  Other than a brand name and a bunch of stores (too many, really; and nearly all in leased spaces), I'm not certain I see anything of significant value that GC brings to the table.

Edited by Biz Prof
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2 hours ago, Carl.B said:

My wife use to work for Best Buy Cooperate HQ when they tried selling musical equipment. One of the reason's they got out of it was how Fender, Gibson, and  almost all other music suppliers deals were struck. They found out quick that selling TV's, Computers, Appliances and electronics was a much easier way to go.

Best Buy was great when my kid worked there and got stuff at cost. The store brands (Insignia, Dynex, Rocketfish) were about 1/4 of list, and weren't all bad.

The music dept was kind of a mess, but again, with her discount it was OK. I got my Taylor there. B)

Edited by hamerhead
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Regarding guitar center employees being miserable.   I get it.    I always thought indie record store employees seemed miserable.  In college I worked in a cool record store loved going there.  Until I started working there.   Boss was an asshole.   When I left I wanted to sign him up for the Columbia record and tape club.    I didn’t but I would have sent him the scorpions back catalog which I thought would have been funny.    Point.  I like gc feel bad for the employeds because they are finding their way like I was.  That said I ain’t buying an goddamn extended warranty...   

I think slot of us are spoiled with their return policies     Try that convenience return with a private seller on reverb   You’ll probably eat $100.   I hope they survive    

 

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There were some that got into (some would say lucked into) the world of "leveraged buyouts" in the early days. Sometime, over a beer somewhere, I might recount some stories that came out of one such deal involving KKR back in the 80s. That was before most folks knew WTF they were, including many of the workers that made them work. The numbers were astounding, the work was incredible and the payoff (amazingly enough within 12 months) was immensely profitable......Can you calculate am $800k+ profit on an actual out of pocket cash outlay of $15k in less than 12 months? Leverage on top of leverage! (Thank you Gene Autry, may you R.I.P.!)

But it was stuff like that which made people shoot for the moon, taking on increasing (and impossible) levels of debt with attendant risks.....With the organizers raking off as much cash as possible as early as possible in the game, thereby kneecapping the longer term future. So the big payoffs never came for many of the folks that jumped in on them. I do not know details of such as the Bain or Ares deals, GC or otherwise, but I am glad to have been far removed from such as those. Lotsa folks got badly burned.

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2 hours ago, DaveL said:

Regarding guitar center employees being miserable.   I get it.    I always thought indie record store employees seemed miserable.  In college I worked in a cool record store loved going there.  Until I started working there.   Boss was an asshole.   When I left I wanted to sign him up for the Columbia record and tape club.    I didn’t but I would have sent him the scorpions back catalog which I thought would have been funny.    Point.  I like gc feel bad for the employeds because they are finding their way like I was.  That said I ain’t buying an goddamn extended warranty...   

I think slot of us are spoiled with their return policies     Try that convenience return with a private seller on reverb   You’ll probably eat $100.   I hope they survive    

 

I think, the big reason a lot of GC AND Sam Ash employees don't exactly enjoy working there is probably due how their workers get paid. It's commission based, which means they don't care how much or how hard you work, they only care about the sales. They don't have a cleanup, janitorial staff: that's something that the employees do, as part of selling the gear. I think after the "trial period" you pretty much first have to earn back your own base pay, and then you can make additional commission, at a lesser rate. So you are encouraged to set your base pay higher, but then the penalties for not meeting that goal are more.

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Guitar Center Alexandria opened just 3 years ago, maybe 4?

Went and bought something there. 2 weeks later, had something else to return, was going to go back there, and the website was gone.

Called, and they were closed. No fanfare.

 

In contrast, Music Go Round always seems to have people in them, even this year, and i've never seen one go out of business....

I'm not going to draw any conclusions from this, tho.

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17 hours ago, Biz Prof said:

Sam Ash is still around--at least for now.  In north Raleigh, the Sam Ash (nee Mars Music) and GC stores are literally across the highway from each other.  They are largely the same in terms of guitar/amp/effects inventory, but the Sam Ash outlet has a much more robust accessories and parts offering.  I tend to find the Sam Ash staff more friendly and helpful, as well.  Perhaps that is a reflection of the Sam Ash work culture vs that of GC.

In Richmond, VA GC and Sam Ash are right beside each other, maybe 200 yards away.  You can park at one, check it out, and then walk to the other in a minute.

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Seems to me that brick and motor stores are barely surviving as it is selling to a diverse population the things they actually need. Selling musical equipment to a select group of the population using their discretionary funds in a time of large unemployment during a continuing and steepening pandemic seems to be a shaky business proposition. Certainly not a operation that I would use my own money to invest in. 

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  • 3 weeks later...

Bam.


 

Quote

 

Dear Tortious,

Thank you for being a loyal customer of Musician's Friend. We genuinely appreciate your business.

I'm pleased to share that our parent company — Guitar Center, Inc. — has announced an agreement to strengthen their financial structure which will allow us to serve you better for the long term. During this time there is likely to be press coverage, so we wanted you to hear from us what to expect.

  • Our website and call centers are open and available to you as we continue to operate our business as usual.
     
  • We will continue to serve your needs as usual, therefore customer service, Musician's Friend Rewards, financing and Gold Coverage remain unaffected.

To facilitate this financial restructuring, we will voluntarily file for restructuring under Chapter 11. During this time, we will have ample financing to continue all of our operations without interruption.

 

 

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Also  https://www.bloomberg.com/news/articles/2020-11-13/guitar-center-is-said-to-prep-bankruptcy-with-creditor-support

 

Guitar Center Inc., the largest musical instrument retailer in the U.S., said it expected to file for bankruptcy after reaching an agreement to restructure its debt.

The plan will include as much as $165 million in new equity investments from funds managed by its private equity owner Ares Management, as well as the Carlyle Group and Brigade Capital Management, the company said in a statement Friday. It also aims to reduce debt by almost $800 million -- it will get $375 million in financing from certain existing noteholders and lenders, and $335 million in new senior secured notes.

“As a result of this financial restructuring process, we will be better equipped to execute on and invest in our strategic growth initiatives and we will continue delivering through the strength of our brands, availability of our stores, customer-focused associate relationships, innovative music education programs and our expanding digital solutions,” Ron Japinga, chief executive officer of Guitar Center, said in the statement.

The company could file for Chapter 11 bankruptcy as soon as this weekend with a pre-packaged plan, people with knowledge of the plan said earlier.

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