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Guitar Center Possible Bankruptcy (yet again)

Discussion in 'Bad Dog Cafe' started by warrent, Oct 26, 2020.

  1. brokenbones

    brokenbones Tele-Holic

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    I have been noticing lately their used gear prices aren't ridiculously high...
     
  2. DHart

    DHart Poster Extraordinaire Gold Supporter

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    This is far from their first rodeo. Unfortunately.

    Brick, mortar, and hungry bodies... planted on retail dirt, is VERY expensive - particularly so when shoppers no longer leave home. Perhaps untenably so.

    I wish them well, as it's nice to have them around. These days, though, I am doing fine without their presence, and I suspect a lot of other players feel the same way.
     
  3. 41144

    41144 Tele-Afflicted

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    2.3 billion in sales but 1.3 billion in overall debts!
    Wonder if that debt is soley to Ares and what the tax write-off against their other businesses that gives them?
    Cynical old me, eh!
     
  4. SuprHtr

    SuprHtr Tele-Holic Silver Supporter

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    I’ve never set foot in a GC. I’ve made on-line purchases from MF and what I consider to be one significant purchase at a local independent shop. However, I’m realizing a greater appreciation for knowledgeable staff. The current employee requirements at GC have probably screwed any chance they have of retaining clientele as bricks-and-mortar stores decline. BUT, I can accept some blame for this trend, being a tightwad and a price shopper. My ECON professor told us that if you decide to spend more to buy local, you are paying a subsidy and not acting purely out of self-interest. My impression at the time was that self-interest was preferable. Maybe I’m rethinking that in my later years. Is greed really good?

    The GC corporate desperation is really made plain if you are signed up for email from GC/MF. I had to unsubscribe. They were bombing my inbox four to six times daily even as I was awaiting shipments, so it had the opposite effect of what they were hoping for. Email marketing costs almost nothing but it comes nowhere close having a discussion with someone who knows their business.
     
  5. JIMMY JAZZMAN

    JIMMY JAZZMAN Tele-Meister

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    There's always a bigger shark, lurking from deep in the realms of the totally abhorrent $$$$$$$$ for nothing
    mentality. Mom/pop business died, so let's see how this turns out.
     
  6. JIMMY JAZZMAN

    JIMMY JAZZMAN Tele-Meister

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    How much markup on a guitar? 20%? 30%? Anyone know?
     
  7. 41144

    41144 Tele-Afflicted

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    At least over here ... generally speaking items like a guitar will carry, before tax, at least a 33% mark-up even when they're "on discount" and in reality more like 66%+ compared to the whole-sale price the dealer paid.

    (National and standard sales tax here, VAT, is 20% ... so at the higher end of the profit margin on a retail sale (with say a 66% mark-up) the price a buyer pays compared to the dealers whole-sale price is basically doubled!)

    None of that's a gripe .... they're in business, they've got overheads and staff to pay etc and so long as they provide good service etc ... fair play.
     
  8. Fiesta Red

    Fiesta Red Poster Extraordinaire

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    WGAF—Insolent Music for Insolent People!
     
  9. Fiesta Red

    Fiesta Red Poster Extraordinaire

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    Equity Firms, by definition, are only concerned about the equity of the businesses they acquire/control.

    The equity firms have successfully squeezed every drop of blood out of this particular turnip (GC).

    Now they (GC) are dealing with the aftermath.

    Also, somebody else said that GC was ok when they were run like a guitar shop, but became bad when they were run like a retail shop...this is true of many/most specialty/niche businesses—they’re made for a specific type of profitability, and generally not a corporate model.
     
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  10. Marc Morfei

    Marc Morfei Friend of Leo's Silver Supporter

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    This sums up one key difference between "mom and pop" retailers and corporate ones. Moms and Pops are probably in business because of their knowledge and passion about a certain product or market. They want to make money, but they also care about relationships, reputation, and service to customers. The ones that stick around know that long-term success depends on those elements, not just financial transactions. Corporate entities are only concerned about the bottom line. Next year, next quarter. There are limitless number of examples of major retailers who completely whiff on long-term planning, and make colossally dumb decisions, because they are chasing the biggest immediate return.

    The merits of GC often get debated here. Though unlikely, would it be good or bad if GC goes under? Will that provide an opening for Mom and Pop to rise again? Probably not, unfortunately. Plus, it seems like Fender and Gibson need GC, since it seems to be the biggest single retailer where people can see and touch their products. As others have already said, probably not much will change.
     
  11. this_grackle

    this_grackle TDPRI Member

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    They've been horrible for quite a while now. The service is awful, half the time stuff show up broken, and god help you if you want a bass amp that isn't Markbass. Maybe it'll give Sam Ash a chance to rise from the dead? Thank goodness for Sweetwater... they might be overbearing and slightly more expensive, but I know my order will be correct and there will be candy!
     
  12. kjatexas

    kjatexas TDPRI Member

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    Likewise. You can't hear yourself playing. I have days off during the week and that's when I go.
     
  13. Anacharsis

    Anacharsis Tele-Holic Ad Free Member

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    I will be very interested to see just how much of the debt restructuring hits manufacturers. I would be slightly surprised if Fender and others haven't tightened their payment terms for GC or even required cash in advance. That's what happened to JC Penney and Sears as they went down.
     
  14. Anacharsis

    Anacharsis Tele-Holic Ad Free Member

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    If I understand correctly, Ares is actually their owner now, having swapped at least most of the debt they were owed for equity. So that billion-plus debt is owed to others - likely the banks Bain used to leverage their buyout back in 2007. https://pitchbook.com/news/articles...y-deluged-by-debt-guitar-center-turns-to-ares
     
  15. Chiogtr4x

    Chiogtr4x Poster Extraordinaire

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    I'm so slow!
    I used to watch WKRP back in the day, and never made an association with the word 'crap' until pointed out ( maybe in media) just a few years ago.

    In ths same way I never knew Arby's ( pointed out by just a BS discussion between Howard Stern and Robin) stood for Roast Beef!

    Me stupid!
    ( but smart enough to stay away from GC- terrible Customer Service, my last trip, now years ago)
     
  16. jvin248

    jvin248 Poster Extraordinaire

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    .

    The banks will only allow refinancing if they see the profits higher than debt payments and the equity value higher than debt.

    A few things in GC's favor to refinance right now (to avoid bankruptcy):

    -GC owns Musicians Friend which in all likelihood had as good of a sales year as Sweetwater/etc. Many gear buyers don't know GC and MF are the same company so MF avoids any buyer impressions baggage. So the total corporate sales picture is quite good, given circumstances.

    -Most brick & mortar businesses' largest expense are employee wages and benefits ... like 70% of the retailer's costs. When the store is only open 25% or 50% of the time (and you compress the normal buyer distribution to show up for the four hours the store is open) you have slashed your major costs. You've moved your store from two shifts (8am-10pm) into a single shift (10am-6pm) and you are only paying half the wages and likely still selling the same number of emergency string purchases that can't wait for shipping.

    -GC owns massive real estate under those stores, I'm sure some are leased, but given the refinancing dynamics they must own most of the locations. It's prime retail land. Stores can be closed and the land leased or sold "at any time" -- so the banks have that to fall back on. Real estate values have only gone up in the last few years and thus it's easy for land appraisals to have gone up. Thus the debt to equity picture has more dollars to squeeze out in refinancing.

    -Refinancing at lower interest rates is attractive. Interest rates are quite low now. Shave a point off a prior loan can mean big money.

    -Refinancing for a new longer time period always looks better. A homeowner ten years into a thirty year mortgage will refinance into a new thirty year mortgage so their monthly payments are lowered. The bank knows this game gives them more cash as the front end of such financing is all interest payments and barely any principal. A homeowner will pay fees to refinance so they maintain the principal with more upfront interest payments again. Banks love interest payments.

    The problems for GC will really surface when real estate values plummet.

    .
     
  17. pinchegil

    pinchegil Tele-Meister Platinum Supporter

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    Have they really died or have they morphed, if you build parts casters I would argue that you are mainly buying from mom and pops. While usually not local, most of these internet shops on Fleabay and Amazon shops are run out of someones home. Any of the boutique pickups are mom and pops. Call Curtis Novak pickups to ask an install or support question and you might actually talk to him. And at least in the Denver Area there are still a few mom and pops that are actually doing well, their inventory is heavier in the used gear but you can still play before you buy. And then there is music go round these are franchised so they still fit in the Mom & Pop mold.
     
  18. Invisible man

    Invisible man TDPRI Member

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    Predatory investment which tanks viable businesses for the profit of the predators should be illegal with mandatory prison time.
     
  19. sudogeek

    sudogeek Tele-Meister

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    It’s a matter of definition of ‘predatory’ and a matter of who’s getting paid. When the mob busts out a bar or other business, it’s illegal. But for the vulture capitalists, the fees are paid down the line so banks, bond traders, investment managers, etc. get their cut. None of them are going to jail. The losers are those holding the debt when the music stops - and, of course, the employees.
     
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  20. Paulie_Boy

    Paulie_Boy Tele-Holic Silver Supporter

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    Still holding on to one of these?

    [​IMG]
     
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