Looks like Guitar Center is in some money Trouble

[drb1346]

Does MF still (or did it ever) own GC?

[backporch guy]

Originally Posted by diffeecult

Quote:
[I]--If they're in bad enough shape to need a revolver to get money then I don't see much hope.

[Arbiter]

Originally Posted by Kyluckyman

It just occured to me Martin, Fender, etc. ought to require cash up front from GC.

Not yet. You don't go there until the first late/missed payment, but then, yeah, cash on the barrelhead. If it gets to that point, the odds of them coming back become very slim.

Did some research. For those who find this sort of thing interesting, the current owner of Guitar Center is Bain Capital.

Guitar Center wholly owns the following companies:

Musicians Friend
Music & Arts Center
Hermes Music
Music 123
Woodwind and Brasswind

So, a Guitar Center default would not affect just the physical stores. It would radically change guitar buying, period. And probably put most major manufacturers out of business.

[J Hog]

Originally Posted by drb1346

Does MF still (or did it ever) own GC?

No it's the other way around. G.C. owns M.F. and a couple of band intrument mail order dealers and retailers.

[tazzboy]

Well if Guitar Center does go out of business it's their own damn fault.

You compare their Sales staff to say Sweetwater and Sweetwater would be the winner in that.

[tazzboy]

Originally Posted by Arbiter

And people ask why I wouldn't dream of buying Fender stock.

If GC went down (and they've been in trouble for quite some time and it's been obvious to me, as a customer) Fender is totally screwed.

So will Gibson and few other major musical brands.

[jipp]

i found this little picture interesting too. who owns the instrument side.
gibson owning orange amp surprised me. since i thought orange amps were British. also why split the gretch drums/guitars apart. shrugs.
chris.

[superlightweigh]

Huh. Too big to succeed.

Thankfully, around here, the small independent stores are still doing just fine. At least two have expanded operations greatly within the last year or two.

[stantheman]

Most of these Big Box Outfits are monopolies created by deregulation that benefit less than one percent of the parties involved, even the majority of the shareholders end up getting screwed. The employees? Forgetaboutit.
I can honestly say that I think Home Depot disrespects it's help even worse than WalMart.
...WOW...

[mr natural]

Funny, I had a bad GC experience a few weeks ago. I don't use GC much. I prefer my mom and pop who always treat me well (and they are a Fender dealer). So I'm looking for a new belt for my turntable and someone recommended GC because that's where they get DJ stuff. So I call and the manager says he'll see if he can order one and get right back to me. He never called back. So I call a mom and pop audio store and get the exact same treatment. Screw it, I found one on line with a new cartridge to boot, for a very reasonable price. I'm no fan of the big boxes and will always support my local although I did make my yearly Sears run last week to get a new water filter for the fridge's ice/water dispensers. Shoot, half of my clothes were bought at thrift stores.
-Mr. N.

[Nick JD]

How big is the American market (as a %age) in sales compared to the rest of the world for the major instrument manufacturers?

[Paul in Colorado]

Originally Posted by jipp

i found this little picture interesting too. who owns the instrument side.
gibson owning orange amp surprised me. since i thought orange amps were British. also why split the gretch drums/guitars apart. shrugs.
chris.

The Gretsch drum/guitar split came about years ago when Gretsch was owned by Baldwin pianos and went under. I believe it was the late '70's. KAMAN (Ovation etc.) bought the rights to use the drum name and kept the brand going. They may have already had it when the guitars were discontinued. It wasn't until the late '80's or early '90's that Fred Gretsch Jr. started up production of Gretsch guitars. Fred still owns the rights to the Gretsch names and trademarks and licenses them to Fender.

As for Orange amps, they once were British, but they went under and trademarks and brands were sold. I guess Gibson ended up with them, and I'm pretty sure they are mostly made in Asia these days. At least the lower end stuff.

If anyone can fill in the blanks with more details, feel free.

[soulman969]

Well don't start lining up outside the doors at midnight yet. According that report they're not going out of business anytime soon. A boost in the economy may help but there's another issue that looms larger for all of these guys.

How many mail order and online retailers can the market support? These guys are virtual hardware stores of music gear. They're not boutique retailers. In addition to big ticket items like guitars, amps, keyboards and live and studio boards and speakers of numerous styles, colors and brands, they'll also sell you barrel tips for Tele and $3.00 patch cables.

They all sell virtually the same products and because speedy service is essential they all stock virtually the same inventory. As long as they get paid manufacturers should love these guys. My guess is you seldom see a product back ordered, no matter how small, from any of them because that will send the buyer scurrying to a competitor where it's entirely possible he'll make his next major purchase if he ends up getting upset with company A over the back order.

The reason their debt is so high is the carrying costs associated with maintaining that inventory. They need to turn product very quickly and when they don't earnings suffer and they get eaten alive by their debt service. No matter how big you are sometimes you just can't be all things to all people.

Closing non-profitable stores would help but then they fear they'll lose market share in that area. Maybe a wiser idea would be to pare down the products and realize that you'll lose some sales as a result but you may become more profitable on lower sales and survive.

If your houseboat is sinking it's not really the best idea to try to take all of your worldly possessions into your greedy little arms when you try to swim for shore. Just sayin'.

[JayFreddy]

We rate subsidiary Guitar Center Inc.'s $375 million revolver due 2016 'B+'
with a recovery rating of '1', indicating our expectation for high (90% to
100%) recovery in the event of a payment default. We rate the company's $650
million term loan due 2017 'B-' with a recovery rating of '3', indicating our
expectation for meaningful (50% to 70%) recovery of principal in the event of
a payment default.

In addition, we rate both Guitar Center Inc.'s $375 million cash
interest-paying senior unsecured notes due 2017 and Guitar Center Holdings'
$401.758 million senior unsecured notes due 2018 'CCC'. Both notes have a
recovery rating of '6', indicating our expectation for negligible (0% to 10%)
recovery in the event of a payment default.

Rationale
Our ratings on Guitar Center reflect our assessment that the company's
liquidity is "less than adequate" but sufficient to avoid a default within two
years.

I think this is non-news. S&P is saying GC's liquidity is sufficient to avoid default for at least the next two years. A whole lot can happen in two years...

Best Buy is the only large scale competition GC faces in the Dallas market, and Best Buy ain't lookin' so hot either.

As others have noted, GC may have to tighten its belt and be more aggressive about profits and cash flow, but they are the still the standard bearer for the entire industry.

It's lonely at the top.

[notdave]

Originally Posted by Paul in Colorado

As for Orange amps, they once were British, but they went under and trademarks and brands were sold. I guess Gibson ended up with them, and I'm pretty sure they are mostly made in Asia these days. At least the lower end stuff.

If anyone can fill in the blanks with more details, feel free.

It's here, if you want to read it. http://www.orangeamps.com/pedigree-history/

n the mid-1990s Cliff licensed the Orange trademark to the Gibson Corporation in America and reissues of 1970s’ Orange amp designs were soon back on the world stage; especially so after Oasis’s Noel Gallagher went Orange and used the amps to record their first two albums.

But Orange really began to blossom once again when it was back in Cliff’s hands in the late-1990s: the company came up with some new designs to mark its 30th anniversary: namely, the AD series of Class A combos. These amplifiers proved to be so popular, that the series was expanded to include 30 watt and 140 watt twin channel guitar heads and a 200-watt bass amp.

The Orange trademark was held by Gibson in the 90s. Cliff Cooper re-acquired the brand, and still owns it. Orange has a manufacturing plant in the USA that services the Americas, but the bulk of production (including all of the Orange valve amps) is in the UK and the Far East - mostly China. That chart is out of date...

I imagine that most purchasers of musical instruments and equipment purchase online these days. That doesn't bode well for physical stores.

The 'equipment' part of the above is significant. A High Street music shop might only sell a customer one guitar, but it could then probably depend on return custom for other stuff. That doesn't happen as much these days. How many of you buy strings in bulk from the shop in your town? How many buy from an e-store?

[Larry Mal]

I live in St. Louis, Missouri. What I have seen time and time again here, is big chain businesses come in, decimate whatever local business they are up against, and then go belly up. Leaving a vacuum that I guess will be filled by Amazon.

I drive past a former Borders every day, and what will fill that vacant space? The Linens 'N **** is still vacant. I could go on and on... but who would be so foolish as to enter into that kind of business again? Why would anyone want to tie themselves down with that much space selling anything in the face of the internet?

No one. The age of the big box retailer is over.

[DoodlySquat]

This really sucks! I was waiting until the year I was elgible to play Battle of the Blues which would be next year (sorry about the age: 21 thing it was a mistake, I'm just a kid)

If it wasn't for bad luck, I'd have no luck at all. ~ Albert King

[nadzab]

A Bain Capital success story...

[czook]

They will probably close underperforming store. If things get too bad they will file for reorganizational bankruptcy, screw their stockholders and debtors, and remain in business. Very common ploy/solution.

[Ed P]

These days I pretty much have the gear I want and don't ever need to step inside a GC again. My fondest memories were as a kid just starting out to play and walking into a GC to try out an actual strat or Les Paul.