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I guess GC is going out of business again ...

Discussion in 'Bad Dog Cafe' started by Flat6Driver, Apr 15, 2021.

  1. stnmtthw

    stnmtthw Friend of Leo's

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    Every music dealer is low on stock right now. I had to wait to order the 12 string Guild I bought from Sweetwater recently.

    Between Covid shutting down manufacturing plants all over the world and lockdowns having a whole lot of people discovering (or rediscovering) how much fun it is to play an instrument, it will probably take a while before we are back up to the inventory levels we are used to seeing.

    As far as Guitar Center, I've been on this forum for almost 10 years and every month there seems to be a new thread about how they're going out of business. They aren't in great shape, but they haven't gone under yet.
     
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  2. Ironwolf

    Ironwolf Poster Extraordinaire Gold Supporter

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    When I wanted to order my 335, Sweetwater couldn't get it for nearly 6 months. GC got it to me in under a week. The inventory of the store here fluctuates as the trucks arrive. Sometimes every couple of days some times once a week or more.
     
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  3. David Barnett

    David Barnett Doctor of Teleocity

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    Blankets and dollies?
     
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  4. Audiowonderland

    Audiowonderland Tele-Meister Silver Supporter

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    I have not seen a well stocked music store anywhere in some time. In this case, this has more to do with broader circumstances
     
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  5. SRHmusic

    SRHmusic Tele-Holic Silver Supporter

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    No comment on the numbers, debt load, etc.? I understand these are not experts, and I'm not defending them in any way. Is a 4:1 debt to cash ratio sustainable for GC, is the question.
     
  6. burntfrijoles

    burntfrijoles Poster Extraordinaire

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    I don't know. It appears to be bad.
    However, GC will surely reassess their model; close stores and tighten their belt.
    It's in the manufacturers interest for them to survive.

    I have no idea how those bozos in the video have access to GC"s debt structure. It's a privately held company. Here is the only real hard data I could find.

    "Just a month after filing to reorganize under Chapter 11, Guitar Center Inc. has emerged after ridding its balance sheet of about $800 million in debt.

    The Westlake Village musical equipment retailer has entered agreements to receive up to $165 million in new equity financing from stakeholders Ares Management Corp. in Los Angeles, hedge fund Brigade Capital Management and private equity firm Carlyle Group. The three firms now own 100 percent of the common stock in Guitar Center.

    The company also raised $375 million by entering a new secured asset-based revolving financing facility funded by Wells Fargo and JPMorgan, and another $350 million – up from the expected $335 million – by selling new senior secured notes. That adds up to about $890 million in operating capital.
     
    Last edited: Apr 15, 2021
  7. Flat6Driver

    Flat6Driver Friend of Leo's

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    I assumed because they sent the catalog out, they were doing better. I really just started the thread because it was a slow day at work.
     
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  8. Killing Floor

    Killing Floor Tele-Afflicted

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    Dang! Again?
     
  9. SRHmusic

    SRHmusic Tele-Holic Silver Supporter

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    I was curious about what was public, too. The court filings are public, and there's a detailed analysis at a consultants group website.

    I'm not well versed in interpreting the information on all these financial instruments, but it sure is a lot of money and complexity for a guitar store chain, eh? Here's what I gather from the analysis linked below (and earlier): $775M in net debt when emerging from bankruptcy, and projections of returning to about $500M a quarter in revenue soon ($2B/year in revenue). There's not a lot of free cash flow on that - around $35M in most years - so perhaps not much margin for error. From this they are still leveraged over 4:1. I misread this earlier. That's debt to LTM EBITDA (last twelve months), and down from 10:1(!) prior to bankruptcy.

    The court filings are available online here. There are hundreds of docs. A few are plan filings, but see below.
    https://cases.primeclerk.com/guitarcenter/
    (also at the Virgina court site, but I think an account is needed)

    This Reorg consultants group page is pretty long - keep scrolling. It has links to a disclosure statement and a key plan filing (both court docs), and it provides analysis of the capital structure and plan - not sure how accurate, but apparently based on the court docs they link to.
    https://reorg.com/post-reorganizati...but-expected-to-grow-through-forecast-period/

    Interesting sentence here at the end, under Strategy: "The company’s forecast assumes about 29 new store openings or acquisitions a year, which would primarily be in the Music & Arts division, according to the [Disclosure Statement]."
     
  10. DHart

    DHart Poster Extraordinaire Gold Supporter

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    RUG retailers seem to go out of business every year and miraculously are back in business, yet again, subsequently. Amazing how they can bounce back so reliably time after time! :lol:
     
  11. getbent

    getbent Telefied Silver Supporter

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    we had a gc thread a couple of weeks ago and one of the members here is a gc store manager, he said business has boomed during the 'break' and their debt is paid. GC has been around a long time... I'd imagine they'll be alright.
     
  12. bcorig

    bcorig Friend of Leo's Silver Supporter

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    There is only one Trucks.
     
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  13. burntfrijoles

    burntfrijoles Poster Extraordinaire

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    Nope. I don’t find the GC saga to be that compelling. Their doors are open. Suppliers are selling them merchandise. If I walked to either of their stores in my area to sell gear, they would buy the gear. If I ordered a new Martin 000-28, they would sell it. Fender, Taylor, Gibson, Martin, Boss, Korg, Line6, et al are thrilled that GC remains in business. In summary, nothing has changed for the average consumer.
    As for the two dudes from Casino music, they should stop throwing shade on GC and focus on their own business. I can’t hide my contempt for them and their BS!
     
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  14. Musekatcher

    Musekatcher Friend of Leo's

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    Similar to all guitar stores, and other stores. Must have been a major world-wide event, that disrupted labor and supply chains, and stalled production?
     
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  15. ping-ping-clicka

    ping-ping-clicka Poster Extraordinaire Ad Free Member

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    "I worked for guitar center , I don't want to hear any thing about their debt load"
     
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  16. beyer160

    beyer160 Friend of Leo's

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    There are two GCs in my area, about 20 minutes apart. One is reasonably well stocked, the other looks like it's been looted by rioters. Make of that what you will.

    That's not always a barometer of longevity, though.
    Screen Shot 2021-04-16 at 6.35.06 AM.png
    Screen Shot 2021-04-16 at 6.34.57 AM.png



    [​IMG]
     
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  17. Rockinvet

    Rockinvet Tele-Afflicted

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    Even if they go away, going in a store to buy or try a guitar will not go away completely. But I don't think they will, maybe less of them or someone else will come along and start a new chain. Brick and mortar is not going to go away, it will just be different.

    Again, I feel for the employees. There are some good people who work there. Guys and gals Ive seen for over almost a couple of decades who are dedicated and knowledgeable. For their sake I hope they survive.
     
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  18. bgmacaw

    bgmacaw Poster Extraordinaire

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    That debt they're shuffling around is going to catch up with them eventually, as it did those companies.

    Right now, there enough interested parties to keep them afloat and sales have been good enough to keep the debt serviced after the reorg. But, at some point, they will start failing to keep up debt payments and they'll be right back in bankruptcy court again. The reasons they will be likely to fall behind are (1) there will be shifts in the economy that reduce discretionary spending by consumers and (2) the debt service will prevent them from being able to innovate or expand, making them vulnerable to more nimble competitors.
     
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  19. Old Deaf Roadie

    Old Deaf Roadie Friend of Leo's Silver Supporter

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    The corporate circling of the drain...
     
  20. burntfrijoles

    burntfrijoles Poster Extraordinaire

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    I remember when Circuit City went under, Best Buy was also in trouble. They floated the idea of their stores just being "showrooms". The premise was customers would browse the store and then orders would be placed on line for later delivery. Nah! That never happened.
    Guitars are tactile instruments. Most folks want to "try it before they buy it". You may eventually order it on-line but most likely you're going to play the model in a store beforehand. There are only a few on-line stores that I would trust when buying a model without playing it. A place like Wildwood comes to mind.
    The gear makers need the brick and mortar stores.
     
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