Another “Guitar Center Bankruptcy” Article. How about some speculation

[davenumber2]

Originally Posted by M Hayden

Blogger and futurist Eric Garland has been predicting this for a couple of years. I’m not surprised - they’re very much in debt, and it’s unsustainable.

That said, they are all the resources in some communities, and the failure of the business would be a shame.

People have been predicting the closing of GC for 10+ years now. Seems to come up at least once a year. I’ll believe it when I see it.

[Mattface]

This could be a SERIOUS bummer for Vermonters. Our largest locally owned music store in Burlington, Advance Music was bought by Music and Arts (another Guitar Center subsidiary) in March. I was there the other day, and they are still much the same as they were, the previous owner still works there as the manager, and the stock was good especially given covid logistical shortages.

The next biggest music store is a Guitar Center 6 miles away in Williston. Of course it was already a little bit of a bummer because that essentially knocks out competition, but if this leads to store closures, Chittenden county, and really the whole state will suffer a huge loss. Even losing one of the two would be a bummer, but I fear we could lose both. When I moved here in the late 80s, Burlington Vermont had at least 4 music stores. Now there are two, but the other one is not much of a store. It's more like a luthier shop with a few dusty instruments on the wall. I assume if Music and Arts closes someone else will probably buy it, but if not it will leave a huge hole in our community.

[Riverwolf]

I never really understand these type of threads.
Seems a lot of members are typing away with glee in their eyes.
I for one would be bummed if GC went away.
Would all the homeowner DIYers be happy if Home Depot went away?
Would they rather buy their supplies from some little mom and pop hardware store?

[Vhpharmer]

Nothing wrong with bringing guitar shops, hardware stores or drug stores back to Main Street America!! Wal-Mart has done everything possible to shut down main street America especially in rural towns or small cities, it really hurts to see family owned businesses passed from one generation to the next be closed down by these big box mega stores. I own an independent small town pharmacy and deal with this on a daily basis

[RP]

Originally Posted by Riverwolf

I never really understand these type of threads.
Seems a lot of members are typing away with glee in their eyes.
I for one would be bummed if GC went away.
Would all the homeowner DIYers be happy if Home Depot went away?
Would they rather buy their supplies from some little mom and pop hardware store?

GC has been perceived as the big bad wolf that's put many small shops out of business. At the same time, I believe that many have developed pre-conceived notions that GC would be all things musical to all levels of musicians. Falling short of our expectations due to poor service, poor selection, crummy strings on guitars, pricing etc, I believe that GC has become the store that some love to hate. However, I'm not sure that many of us are looking forward to GC "going away."

[BoneDigger]

I'm perfectly content with big box stores. Until Lowe's opened nearby, the local hardware store closed at noon on Saturday and wasn't open at all on Sunday. If you had a plumbing leak you had to drive an hour to get parts. Pharmacies were closed Sundays and often Mondays too.

Guitar Center is what it is. The local music store had to adapt and they did so quite nicely. Until GC opened, they charged higher prices, often close to MSRP on Martin and other guitars. When GC opened, they started matching online prices. They still make plenty of money and now get more of my business.

Back in the 19th and early 20th century, there weren't a bunch of individual mom and pop stores in most towns. They had a "general" store that sold everything from hardware to clothes. That changed as populations grew. These mom and pop stores put the general stores out of business. Now the trend has reversed and Walmart is playing "general store" again. Mom and pop stores need to adapt.

[Mbroady]

Originally Posted by Riverwolf

I never really understand these type of threads.
Seems a lot of members are typing away with glee in their eyes.
I for one would be bummed if GC went away.
Would all the homeowner DIYers be happy if Home Depot went away?
Would they rather buy their supplies from some little mom and pop hardware store?

I would also be bummed if GC closed its door. I think they offer a great service for the ever day music enthusiasts as well as the professional musician. With that said, if they were to close their doors then many of the smaller shops might have the chance to increase there business.

[Riverwolf]

Originally Posted by Mbroady

With that said, if they were to close their doors then many of the smaller shops might have the chance to increase there business.

Maybe. But is that always a good thing?
I think not.
I have been to most of the small mom and pop music stores and am not really impressed.
I often feel uncomfortable and don't like being watched and listened to my every move.
Mom and pop don't like to cater to the Casual buyer or the looky loo.
I would love to go to a guitar/music store the size of a Walmart.
The bigger the better.
Just as I prefer Home Depot to the local Ace Hardware.

[Boozehound]

Originally Posted by Maryc-k

yes, but if you wanted used gear you either went into GC or shopped their on-line. My comment was that now the used merchandise at GC is available through MF's webpage. Not everyone is thrilled with GC's on-line shopping format.

Dwight- People have really picking through the used stuff on MF over the last week or so. They have been doing a lot of markdowns, so if you see something don't wait. I would not be surprised if they closed down GC eventually and just stayed with the MF model. They'd save a lot of money.

People are still buying instruments, and manufacturers and builders are still backlogged. So, who are they going to ship too? The retailers who pay their bills or the ones who don't?

Thanks for the PSA (or maybe not ). I just grabbed a 'great condition' Santa Cruz Tony Rice for $2699. We'll see what the actual condition is when it arrives, but I can't recall seeing one that cheap anywhere before. It has the usual GC crappy pictures so I'll be sure to give it a thorough inspection upon receipt - figuring I can return and argue 'condition not as advertised' if anything is wrong with it.

[Br1ck]

At some point, credit managers at GCs vendors just have to wonder why they kept sending product to GC without payment for previous shipments. (answer: they had sales guys and other management heavyweights wanting to make their bonus numbers) Of course they will get blamed. I understand how much GC is as a percentage of sales, but at some point, the tail wags the dog. The danger is that the dominoes start falling doing major damage to manufacturers, commercial real estate companies, and don't forget, employees.

[Mr. Jelly]

When I sold candy years ago every so often the candy company came out with a new candy. I would sell this new candy up and down the street at every candy outlet. Everyone was receptive since it's new etc. Of coarse the new candy didn't go over that good so there wasn't any reorders. I would never sell it again anywhere. After going through this several times it dawned on me how the candy company made good money by loading up the retail selves and let the retailer take the hit. Applying this to GC you can see that a company can sell a new guitar thingy bob to GC and they would put one or two in every store. Wash and repeat as they say. Now even if GC didn't pay for it the manufacture can go to a bank and show how successful sales are along with shipment numbers and get an additional loan or extension etc. A big part of this game is that the owners are taking profits and pay checks right along. When things fail everybody gets screwed yet the money the owner has been paid stays in their bank account. If MF is associated with GC then it is conceivable that under the bankruptcy courts umbrella GC could liquidate merchandise to MF at sellout prices. MF gets cheap merchandise and doesn't have to contend with GC in anyway. At some point MF goes back to the bankrupt manufactures and it starts over again. It's all a way of doing business. Things change yet stay the same.

[MakingMusic]

Interesting development but not surprising and it will all get worked out in bankruptcy court. I’m sure the current debt holders will get the keys to the company and then they’ll sell it to another private equity shop.

Musical instrument sales are crushing it but having a bunch of big box stores with a large amount of debt only works pre pandemic.

Guitar Center isn't going to disappear but a significant number of stores will close.

[L20A]

How will this impact Musicians Friend?
They are affiliated with GC.

[Boozehound]

Originally Posted by L20A

How will this impact Musicians Friend?
They are affiliated with GC.

It depends on how they are structured, I would think. Not sure if they could file bankruptcy on just the Guitar Center portion of the business.

I'm sure they will continue in some way, even if they file bankruptcy. The manufacturers don't want to see a retailer that size go under, so they will work with them to the greatest extent possible.

[mcduffnw]

Originally Posted by MakingMusic

Interesting development but not surprising and it will all get worked out in bankruptcy court. I’m sure the current debt holders will get the keys to the company and then they’ll sell it to another private equity shop.

Musical instrument sales are crushing it but having a bunch of big box stores with a large amount of debt only works pre pandemic.

Guitar Center isn't going to disappear but a significant number of stores will close.

The current debt holders, Ares Capital Management, already have the keys to the company. They got the keys in 2014, as they were the primary debt holder on GC Debt Bonds when it was owned by Bain Capital and GC/Bain was just about to miss an almost 500 million interest payment on a major portion of that bond debt to Ares Capital in 2014, so Ares took control of GC from Bain in lieu of the interest payment money. Ares Capital still lost the 480 million, but they got the "keys" so that they , Ares, could at least control their destiny as GC winds it's way into Bankruptcy proceedings.

As far as what will happen...likely all of the creditors will try to somehow work something out, because, if they don't, the creditors are going to have to take a 1 BILLION dollar haircut...and...if GC were to go out of business, or even be massively reduced in overall size...which could happen...then think of all the carnage for the product manufacturers/vendors for whom GC is their largest retailer, both Brick and Mortar and Online...and all of the investors...and all of the public customers.

As Eric Garland so eruditely said in one of his articles about the End Of Guitar Center:

Owe the Bank a million dollars, it's your problem. Owe the Bank 100 million dollars, it's the Banks problem.


So...owe the Bank...all the investors and vendors...1 BILLION dollars, it's the ENTIRE Music Retail Industries problem.

The damage from GC entirely failing would be near to likely catastrophic for the whole MI Retail Industry.

It's kind like the lyrics to the Beatles "We Can Work It Out":


Think of what I'm saying
We can work it out and get it straight, or say good night
We can work it out
We can work it out


duff
Be A Player...Not A Polisher