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  #16  
Old 12-26-2012, 11:08 PM
Diamond Dave Diamond Dave is offline
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I like to support mom and pops that sell over the internet and sponsor AGF.
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  #17  
Old 12-27-2012, 03:34 AM
bmc bmc is offline
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Originally Posted by tbp0701 View Post
I think Bain also had GC focus more on where it makes the most money, mainly high end guitars and starter packs.
That's an interesting point that I would like to hear from them where they make the most money. On a per-transaction basis, their take on a high end guitar will be more than a lower priced guitar. But, how many high end guitars will they sell, compared to higher volume lower priced guitars. The overall revenue may be higher selling cheaper stuff.
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  #18  
Old 12-27-2012, 04:38 AM
Joboxer Joboxer is offline
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Default GC are NOT doing well

When you walk in a store and see loads of people buying, you automatically assume they must be doing well. Not always so. Last years EBITDA (Earnings before tax etc) for GC was $170mio (on $2bn revenue) - that was not even enough to pay the interest on their outstanding debt. They had to restructure a bond they issued, by cutting interest payments to their bond holders in half and extending the maturity. For this they had to increase the total amount of interest owed on that bond to get the debt holders to agree.
Total debt is close to $1.6 bn... Now debt is ok if you can service it, but in GC's case they are struggling. Unless they achieve significant growth in sales revenue, they are going to have their own fiscal cliff in April 2013, when a large chunk of debt has to be repaid.
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  #19  
Old 12-27-2012, 04:49 AM
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Don't kid yourself things will change if a company does not make a profit. They will have to deal with reality.
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  #20  
Old 12-27-2012, 05:22 AM
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Quote:
Originally Posted by Joboxer View Post
When you walk in a store and see loads of people buying, you automatically assume they must be doing well. Not always so. Last years EBITDA (Earnings before tax etc) for GC was $170mio (on $2bn revenue) - that was not even enough to pay the interest on their outstanding debt. They had to restructure a bond they issued, by cutting interest payments to their bond holders in half and extending the maturity. For this they had to increase the total amount of interest owed on that bond to get the debt holders to agree.
Total debt is close to $1.6 bn... Now debt is ok if you can service it, but in GC's case they are struggling. Unless they achieve significant growth in sales revenue, they are going to have their own fiscal cliff in April 2013, when a large chunk of debt has to be repaid.
And turning this high dollar inventory into cash vs. more inventory makes sense. Lets see what happens come April.
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  #21  
Old 12-27-2012, 06:40 AM
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THey just opened a brand new store right down the street from me in late November.
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  #22  
Old 12-27-2012, 06:50 AM
geelinus geelinus is offline
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Mars Music . . . er, uh, Guitar Center is doing just fine . . .

A billion dollars or so in debt is nothing to worry about. . .
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  #23  
Old 12-27-2012, 07:13 AM
Joseph Hanna Joseph Hanna is offline
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Originally Posted by harmonics101 View Post
Oh for Pete's Sake, i'm sure GC is doing just fine.
GC may not be going out of business. There are of course many options available legally before they're force to call it quits. That said there are some easily researched, pragmatic, tangible and titanic problems the company is faced with. They are a long, long, long way from being fine. They are nearing 2 billion dollars in debt. The company's credit rating is virtually gone. They haven't be able to cover even the interest on their debt for well over a year. They cancelled some massive, long term contracts for production (particularly in the Asia market) for entry level product that in short, not only financially weakened a long standing vender but pissed them off beyond repair. The bulk of their 2 billion debt comes due this year. Their having difficulties paying even mid-level venders and some (rightfully so) no longer do business with them.

They'll have to do some fundamental re-structuring and as I said there are remedies should they decide to streamline. Still the absolute last thing in the world GC (as a business) is, is fine.
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  #24  
Old 12-27-2012, 07:17 AM
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The small GC near me has always catered to a crowd that buys mostly low end starter guitars up to mid priced stuff. There's the odd $3000 Gibson or Taylor acoustic, but most of the high end electrics they have are trade ins on the wall behind their somewhat protective counter. Most of those apparently get shipped to other stores via internet sales instead of being sold in their store.

I suspect the definition of a GC failure might look more like a restructuring of the company leaving some stores open and others closing to achieve an economy of scale. Maybe something like a merging of GC and sister company MF would create a new entity with a slightly diluted debt.
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  #25  
Old 12-27-2012, 07:18 AM
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Okay Joe, I get your point. Does that mean the best discount sale in history after the new year for us at our local GC? I dont like to see anyone lose their job or company go under but if bad managment ( usually the cause) sent it south maybe someone could profit by it.
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Last edited by GHS; 12-27-2012 at 07:19 AM. Reason: spelling
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  #26  
Old 12-27-2012, 07:46 AM
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Think about this: who ever thought that Border's Books would close? A large chain of stores comes with an incredible overhead, especially real estate and leasehold costs. An inventory that tends to remain static (ie. high end guitars or a ton of books on the shelves) does not help the balance sheets. You want your customer making frequent visits and purchases.

One item not mentioned in the discussion is that GC also owns the Music and Arts chain.

My guess is that Bain Capital will just dump 'em and see if they can salvage any of their investment by carving up the company.
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  #27  
Old 12-27-2012, 08:01 AM
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...also worringly, GC (as of march 2012) owed Fender $11mio. Its doubtful much, if any has been paid off.
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  #28  
Old 12-27-2012, 10:21 AM
rocket launcher rocket launcher is offline
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My daughter and I were in one of the 3 GC stores here in Houston yesterday piddling just around. Place was packed and guitars and gear was still flying out the door. We were at the largest store (Westheimer) which is always stocked with full product lines including the top of the line Taylors, Martinds, Breedloves, etc.

However, even with product flying off the shelves, hard to make up $1.5B in debt without a large amount of high margin big ticket items.
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  #29  
Old 12-27-2012, 10:33 AM
harmonics101 harmonics101 is offline
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Well, thank you Joseph Hanna and others that have corrected me and backed up the fact that GC is NOT fine.

I stand corrected.

Quite true about that static high value inventory that is inherent in guitar sales.

It may be quite correct they have over extended and got too large.

So who is their competition ?

Internet sales ?

I can't see that as an answer since they do own Musician's Friend.

If they go, there goes the last bastian where I can practice any sort of high end guitar, since my Mom and Shop is no longer a Martin preferred vendor.

I refuse, I tell you I REFUSE, to try any of the new stuff in the Martin line

I'm just too old fashion that way

Harmonics101
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  #30  
Old 12-27-2012, 10:44 AM
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Guitar Center is doing bad. Many of us already heard about this, but. . . I'm a bit confused....

Is it true that Bain placed this 1.56 billion dollar debt burden on Guitar Center after they acquired them back in '07? If so, WHY?! Were they intentionally trying to sink them?
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