Guitar Center in Trouble

[loco gringo]

I won't miss them if they go under. Gibson might, though.

Originally Posted by DupleMeter

If you read the MI trade magazines you get a more complete picture of the issue. Long story short, their loans mature in 2018 and they have little prospect of being able to pay the notes.

It will be interesting to see if they get an influx of cash from their investors (Bain Capital) or if they liquidate some or all of the stores to recoup what they can.

Here's my prediction. The loans will be restructured. While GC can make some money to pay down these loans and there is some hope of getting more out of them, it's unlikely the investors will divest at firesafe prices for what they can get from what is on hand, which isn't much in comparison to what is owed.

I suspect this restructuring will result in some changes that we can see, but what those will be is hard to imagine. I would suspect the closing of certain stores that aren't pulling in sufficient numbers, particularly those in smaller metro areas and those weaker stores in larger metro areas that could be seen as siphoning sales from other local GCs, thus creating unnecessary overhead for GC in those markets.

[JeffreyAK]

There are 6 stores in the SF bay area where I live, with two more a bit farther out, so one problem they might have is, too many stores competing with each other. Especially given the strength of online dealers who can usually undercut their prices, and have the advantage of delivery to your door with no driving at all. Shopping in person has advantages too, but 6 stores within a 45 minute driving radius?

[justonwo]

Originally Posted by JeffreyAK

There are 6 stores in the SF bay area where I live, with two more a bit farther out, so one problem they might have is, too many stores competing with each other. Especially given the strength of online dealers who can usually undercut their prices, and have the advantage of delivery to your door with no driving at all. Shopping in person has advantages too, but 6 stores within a 45 minute driving radius?

We also have some shops in our area that beat the pants off GC. Gryphon. Schoenberg. Guitar Showcase. Gelb.

I don’t go to Guitar Center anymore. They simply don’t have much that interests me. The other stores are much better, have more knowledgeable staff, and similar prices. They raced everyone to the bottom and then got caught by a shrinking market. If I wanted an electric, I’d go to Guitar Showcase or buy used online. For acoustics, Schoenberg or Gryphon.

[Don W]

People just are not buying guitars like they used to. They play iTunes now. There was a time when everyone was playing and learning...those days are gone I fear. Guitar Center was always a great place to try guitars and amps out. I own a really nice American Strat that my wife bought for me at Guitar Center in 1996 as well as a great Fender amp.

[jfgesquire]

And, oddly, I find myself using Guitar Center more now than ever before... strings, cables, drum stuff for my son.... and my Martin DC-MMVE

I like to be able to see, touch, and hear stuff before I buy it, but if I do have to order on-line, I will see if I can order it from Guitar Center. I can have it shipped to the store for free and examine it right there at the counter. If I don't like it, I don't keep it. I just ordered new Evans G2 drum heads and snare batter head for my son and something with the order was wrong. The manager fixed the issue and made me a very happy customer.

Most of their prices are very close to online and I'm willing to pay a small percentage more for the benefit of seeing it first.

And, the employee in my local Guitar Center have jobs . . . and I own a business . . . so that is more people that have money that may hire me and pay my fees . . . which will give me more money to by stuff from GC . . . ahhh . . . commerce.

[fazool]

Originally Posted by Earl49

Yup, been about two weeks -- give or take -- since this topic last popped up and ran its course here. Not criticizing, mutts, but it is a recurring topic of discussion every time some financial magazine or paper does a story, with just enough time in between so the thread drops to about page 4. Essentially the same story has been running for years.....

Partly true, but each time something like this happens it is because of a new milestone event, which is financial news.

For example if they have debt-to-earnings covenants or if they have leverage reduction milestones etc, then each time they fail, it's another report card on the way to flunking out of business.

[ii Cybershot ii]

I imagine they'll just close like half their stores. Some guitar centers are very small, have crap inventory, every guitar is dirty and disgusting, etc. While some stores are large, clean, shiny, lots of guitars, etc.

[fazool]

We have two in our town which is ridiculous because we are a small market - I cannot imagine them keeping both open.

The shame of it is that the new story is crummy and the old store is much, much nicer.

If they close the nicer older store, I'll probably stop shopping there altogether.

The old one has three connected wood-paneled, wood-floor acoustic rooms (general, high end and classicals). The new store is all jammed into one room that is totally randomly "organized".

[AHill]

This doesn't surprise me. Went to my local GC which is mediocre at best a couple of days ago and noticed they've rearranged things, with picks and pickups now accessible to anyone who walks in. The number of effects pedals is probably about 1/3 of what they had a year ago.

It wouldn't surprise me if they did a Chap 11 reorg and just kept Musicians Friend online and maybe a few of the big market stores like the Hollywood store. With folks like our sponsors doing very well with online sales, I can see how a local store that tries to be everything to everybody struggles.

[Reasley]

Originally Posted by rokdog49

One of the leading factors if not THE leading factor is that electric guitar sales are and have been dropping. All gear related to electric guitars follows and because GC is so heavily invested in that segment, there is no easy way out.
The music culture and landscape has changed in many ways just in the last ten years. Despite optimism from some folks in the business, I think generally speaking, the guitar sales will continue to fall off and that includes acoustics though at a lesser rate. In my mind, the market just isn't going to be there. The boomers are in the rear view mirror and the bubble seems to have burst.
Hope I'm dreadfully wrong.

Very good and astute observations. Thank you.

[fazool]

People keep saying guitar sales are declining but they're not.



Granted this is two years out of date but, the general trend is way, way up. Perhaps some short year-over year fluctuations but no declining trend.

Guitar sales average trend is pretty flat from 2033 to 2012. There was a big spike up 2004-2006, then it dropped back down to steady for 2008-2015.

This jives with comments I heard from a Taylor rep and read in other industry reports.

If you erase the spike (up and down) from 2003-2008, the overall trend has been growth to 2003 (skip to 2008) and steady flat up to 2015.

It's online sales that are killing GC.

[menhir]

Originally Posted by jfgesquire

And, oddly, I find myself using Guitar Center more now than ever before...

Me too..

GC doesn't stock everything I may be interested in but, who does? Also, there just aren't a whole lot of brick and mortar options around here even though I live near a city. I find my GC has a better selection of equipment at one location and frankly, a larger selection and range of decent acoustic guitars than most of the other places near me. The sales staff has been helpful, too.

On the other hand, I recently took one of my guitars to a small local dedicated guitar store for a simple strap pin installation. (I could have done it myself, but I wanted a real repair person to do it.) They stood gawking because they had never seen or heard of a fan fret guitar. I had to stop the repair dude twice because he was about to go ahead and drill in the wrong place, even though I gave him the proper measurement as given to me by the designer.

Just as every GC may not be as good as the one near me, at least in my experience, I'm also not asserting that every employee at that dedicated guitar store is a yahoo.

But I'm done with assuming that every small shop is inherently a superior alternative.

Anyway, I don't wish anyone to lose a job.

...And, the employee in my local Guitar Center have jobs . . . and I own a business . . . so that is more people that have money that may hire me and pay my fees . . . which will give me more money to by stuff from GC . . . ahhh . . . commerce

I own a business too. I get it.

[Denny B]

Originally Posted by Earl49

Yup, been about two weeks -- give or take -- since this topic last popped up and ran its course here. Not criticizing, mutts, but it is a recurring topic of discussion every time some financial magazine or paper does a story, with just enough time in between so the thread drops to about page 4. Essentially the same story has been running for years.....

Yeah, nobody loves and relishes a good recurring "Guitar Center In Trouble" thread like they do here...

[Pura Vida]

Originally Posted by fazool

It's online sales that are killing GC.

Yep. And that's not exclusive to instrument sales. Lots of brick and mortar stores are facing an uncertain future this holiday season. It's coming down to online and mega stores for the majority of shoppers.