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Hardrock69
04-04-2013, 10:39 AM
http://thetoneking.com/wp/life-support-how-long-until-they-pull-the-plug-on-guitar-center/


Article from this past November......2012....


From all sides, it looks like Guitar Center may be in a slow spiral into oblivion. That sounds harsh, but things aren’t going well for the company and haven’t been for years. Moody’s downgraded them…again. S&P Downgraded them…again. They haven’t posted a net profit in several years. They’re getting screwed in loan interest. And, to top it all off, rumors are circulating that manufacturers are getting antsy with GC’s poor performance.





A bit of history is in order.

Guitar Center was founded in California in 1959 by a dude named Wayne Mitchell. Originally an organ dealer named The Organ Center, they started finding more money in Vox guitars and amps. Changing their name to The Vox Center in 1964. The name didn’t last too long, and by 1970, Mitchell finally changed the name to Guitar Center.

But the big story behind GC is the name Larry Thomas. Starting out as a salesman in 1977 in the San Francisco store, Larry made his way up to CEO and President in less than 20 years. After taking over in 1991, Larry was the guy who made GC “The largest music retailer in the world.

It’s a great American story. A young man starts off at the bottom of the ladder, works his way up, and ushers his company into greatness.

If only it had stopped there.

On June 27, 2007 GC was bought out by Bain Capital for $1.9 billion plus assumed debt. With the debt, Bain had written a $2.1 billion dollar check for Guitar Center and all of its subsidiaries.

For those who don’t know, Bain Capital is a private equity and venture capital group that was founded in 1984 by current presidential nominee Mitt Romney. Basically, Bain buys companies, restructures them, and then sells them off at a profit. There are some success stories, and some no-so-success stories.

Unfortunately, when it came to Guitar Center, Bain hasn’t had much luck. One of the common complaints among GC employees after the restructuring involves their compensation. It’s hard to believe, but Guitar Center used to offer comprehensive pension and benefit plans. It’s the usual story. Outsource IT to India, freeze raises for years, increase management but cutting back on sales personnel by making them part-time, making it difficult to keep the floor covered.

And being hit by a recession right after the buy out didn’t help matters any.



Where are we now?

Guitar Center is more than 1.6 billion dollars in debt. I’ll say that again so that you can fully grasp what I’m saying. Guitar Center owes 1,600,000,000.00 dollars to other people. As of March of last year, they had been on their knees begging to get a 2.5 year extension on $650 million of that total debt load. For an extension to April 2017, GC agreed to a 9.9% total interest rate.

An interest rate of 9.9% means that GC needs to pay back $64,350,000 dollars in interest on that $650 million dollar loan. And that’s only one loan! They have another for $622 million that they’re asking for an 18-month deferment on 50% of the interest payments. Who knows what the interest is on that bastard.

Even though GC murdered its competition by having over $2 billion in sales in 2011 – Doubling Sam Ash’s sales at the no. 2 spot – they still don’t have enough cash flow to cover even the interest in its debts. Which is explained in the Moody’s downgrade.

So, how does the world’s top seller of music gear end up not making enough money to cover their debt?

First, you need to know that that $2 billion figure is not just GC’s brick and mortar stores. That figure includes Musician’s Friend, Harmony Central, Music and Arts, and all of their subsidiaries.

That $2 billion ain’t profit. To give you an idea of the costs of running the GC empire: According to Moody’s, in May of 2011, Guitar Center’s earnings, before “interest, taxes, depreciation, and amortization,” was estimated at $170 million. Dropping down from $2 billion to $170 million is one hell of a kick to the head.

From here it gets a bit harder to follow.

You see, in the business world, earnings aren’t the same thing as profit. According to Guitar Center’s filings for 2011, their Gross Profit is about 30% of their total sales or $60 million. “Interest, taxes, depreciation, and amortization” must be damn expensive if it took them from $170 million to $60 million.

To add to the cluster-frak sundae that is Guitar Center’s finances, according to their 2011 filings, Guitar Center had a Net loss of 7.4% or $111 million. My guess is that number includes payments on taxes and loan interest. Either way, if GC continues working with a Net loss of $111 million with a $1.6 billion dollar debt load, they might as well put their heads between their legs and kiss their ass goodbye.

Recently Moody’s has downgraded Guitar Center’s liquidity rating to Speculative Liquidity Grade – 3. Basically, it means that GC doesn’t have enough money to cover its interest expenses. On top of that, Moody’s is pretty sure that GC’s performance won’t improve over the next 12 months.



What’s going to happen now?

Well, that’s a tough question to answer. There are too many companies that have their hats in the ring to let Guitar Center go into bankruptcy so easily. Also, manufacturers are getting pissed at GC. Most of that mounting debt is probably due to them for product. And Guitar Center has been telling a lot of the manufacturers to piss off. But, most of these manufactures can’t simply jump ship. They sell too much of their stuff through GC. Most of them are probably just sitting quietly and trying to ride out the storm. But if things get much worse, don’t be surprised if you seen big brands pulling their lines.

Guitar Center’s reaction seems to be to get further into debt by opening more brick and mortar stores. They’re trying to make themselves look pretty, like nothing’s wrong. “Don’t worry. We’re expanding. Everything’s great.” All the while, they’re only burying themselves deeper under a mountain of debt.

Much of Guitar Center’s debt is coming due in April of 2013, which is not that far away. I guess we’ll just have to see what happens then. I would be surprised if Guitar Center didn’t go down. But if there are enough people who are willing to throw money at them, then I guess they’ll stay in business. If they do go down, I just hope they don’t take the rest of us with them.

ELVIS
04-04-2013, 10:55 AM
Maybe Obomba will give Guitar Center a bailout...

Matt White
04-04-2013, 10:58 AM
NEVER a fan of GC............

wouldn't hurt me a bit to see them go away....much prefer the "Mom & Pop" shops with customer service & actual Guitar Luthiers....

sad to see another profitable AMERICAN company ruined by BAIN...thanks again Mittens

ashstralia
04-04-2013, 11:04 AM
you guys should come here as 'economic refugees' while you still can...

ELVIS
04-04-2013, 11:18 AM
I've given it some thought...

People don't see how our economy is being artificially propped up with nothing but thin hot air...

Matt White
04-04-2013, 11:52 AM
I'm still amazed that people haven't seen the devaluing of the dollar for ages as part of the plot to drive down wages here....AMERICA has been sold down the river...we're just now waking up to the sad reality..."WELCOME TO THE 21st CENTURY"...more like "The 19th CENTURY was so profitable we wanted a do-Over!"

jhale667
04-04-2013, 03:40 PM
I made a ton of friends and connections there, it's how I got into teching...but I must say , they were a fucking horrible company to work for. I made decent money as a manager back in the day, but I my friends that are still there tell me they've reduced the compensation to PITIFUL levels now to where you could be the best sales guy on the planet and you'll never break $30K in a year... who can live on that??

I refused to play along with the management headgames they play on non-managerial employees (they'd prefer to rule by fear, but anyone with a brain knows that doesn't work), and wouldn't write up my guys over stupid little infractions like they wanted (always keep disciplinary paper-trail, y'know), or things of that nature. I actually got called into the office by my store and sales manager one day to be asked "Dude, we're wondering... WHY ARE YOU HERE? You're not like our usual employee. I mean, clearly you've read a book or two..." I heard the Amityville Horro "Get OUT!!" voice in my head... jumped ship for greener pastures and never looked back.

Part of their business model actually MANDATES that they open X number of stores a year... which they should probably seriously cut back on at this point...

They also recently got nailed in a class action lawsuit for a completely illegal deal they used to pull on hourly employees... they'd pressure you to clock out (since your base pay was deducted from your commission), and then try to keep you there (even locking the doors) after closing for a couple of hours so they could get free labor - AND they'd actually have the audacity to tell you that you "weren't a team player" for refusing to work for free! Missed getting a payout of missed wages by a few months due to the effective dates of the suit, but some of my friends actually got back pay they were owed...


Having worked for them, I can say IMO based on witnessing their shitty business practices first hand they pretty much deserve whatever's happening to them right now.

DLR Bridge
04-04-2013, 04:02 PM
So, should I just take a brick to the window, grab what I want and run as they probably have stopped paying for security? Thoughts on this please.http://img.tapatalk.com/d/13/04/05/a7eze9uv.jpg

jhale667
04-04-2013, 06:05 PM
Their corporate goal apart from being the Home Depot of guitars, was/is to "crush every other music retailer" - especially mom & pop stores. Good to see they may not succeed at that goal.

DLR Bridge
04-04-2013, 06:14 PM
Soooooo....brick through the window?

jhale667
04-04-2013, 06:38 PM
Soooooo....brick through the window?

Have they stopped paying to run the security cameras yet? ;)

sadaist
04-04-2013, 08:01 PM
sad to see another profitable AMERICAN company ruined by BAIN...thanks again Mittens



Wrong. I can't stand liberal minds.


They were having problems to begin with or Bain would never had been involved. And blame GC sucking on the failed guitar heroes that work there that make every customer feel inadequate and ashamed to even be in their presence. Keeps a lot of people out of that place no matter how good the deals are.

Hardrock69
04-04-2013, 08:34 PM
They could just as easily be selling shoes, or pet supplies, or whatever.

Some ignorant suits thought "Hey, let's make a Home Depot chain for musicians....we can run it at a loss for years, then sell it and cash out........if it gets too bad we can just file Chapter 13 and walk away, and avoid a large tax bite by writing it off as a loss.....".

Music does not enter into the reason for GC's existence.

ashstralia
04-04-2013, 08:41 PM
having people selling anything on a commission basis these days is just dumb. all the competition...

case in point;

one of my students recently bought a mex tele shipped from the u.s. in a case for 600 clams aus... i doubt fender australia gets them that cheap at wholesale. the internet is changing the retail model forever.

brick and mortar shops will go the way of the dinosaur.

DLR Bridge
04-04-2013, 08:50 PM
Wrong. I can't stand liberal minds.


They were having problems to begin with or Bain would never had been involved. And blame GC sucking on the failed guitar heroes that work there that make every customer feel inadequate and ashamed to even be in their presence. Keeps a lot of people out of that place no matter how good the deals are.

Bub, you've got friends here with liberal minds. Separate yourself from your fellow conservative minds in here with their vitriolic tone (see Sean Penn's son thread) and simply say you disagree.

Bain set out to absorb, profit from, then discard struggling companies. Look at their track record. Not sure I follow your failed guitar hero angle. A lot of these cats work on draw commission, so the last thing they ever did to me upon entering was treat me like I was worthless. If anything, they're too nice.

All of those places are the same though. Sam Ash, etc... I agree that Mom & Pops stores are the way to go.

jhale667
04-04-2013, 09:58 PM
Wrong. I can't stand liberal minds.


They were having problems to begin with or Bain would never had been involved.


Uh, no - from what I've heard Bain got involved because some core people wanted to walk away millionaires...and they did. Remember, Vulture Capitalists get involved when somebody wants to make a quick buck too... The store-opening quota and most of the attitude that is killing them is post-Bain.

Matt White
04-04-2013, 10:40 PM
And blame GC sucking on the failed guitar heroes that work there that make every customer feel inadequate and ashamed to even be in their presence. Keeps a lot of people out of that place no matter how good the deals are.

Just don't be a failed hack guitar player.....remember, its nobody elses fault if you suck...only yours.

Put down the Ayn Rand garbage & pick up GUITAR WORLD.............;)

DLR Bridge
04-05-2013, 01:52 PM
http://img.tapatalk.com/d/13/04/06/5uje8e3e.jpg
Ok, so I left my brick at home (probably for the best) and decided to take a closer look at this puppy. It is signed by Ed and does appear to be a back up 5150, but can't figure why the neck would be so beat.

DLR Bridge
04-05-2013, 01:54 PM
http://img.tapatalk.com/d/13/04/06/e9ahuzu7.jpg
The gaping void on the wall is where 10 or so Wolfgangs were hanging less than a month ago. Perhaps Ed had them yanked to avoid disgruntled employee theft.

jhale667
04-05-2013, 02:23 PM
Is that the Paramus store?

ashstralia
04-05-2013, 02:28 PM
the p.o.d. is in that photo.:D

DLR Bridge
04-05-2013, 02:42 PM
Is that the Paramus store?

14th street Manhattan

twonabomber
04-05-2013, 03:00 PM
Their corporate goal apart from being the Home Depot of guitars, was/is to "crush every other music retailer" - especially mom & pop stores. Good to see they may not succeed at that goal.

But now that the mom n' pops have been gone due to GC and Sam Ash entering markets, will any step up to take their place?

We had Lentine's here, a local three store chain. I bought a few things there, they carried their own accounts and would do 90 day same as cash deals. They extended me credit when not a lot of other places would so I bought there frequently. Sodja Music was another good store I bought from, they carried on after the big stores came to town but finally the owner retired to Arizona. He had a good run.

There's a couple stores in my hometown that have been there forever but they're far enough from Cleveland that they manage to live. One does good school band business, I took coronet lessons there in 3rd grade. The other store was a couple blocks from school, I'd take my lunch money down there at the end of the week and pay on my layaways. Got my Roland SH-101 there. Still have it...

DLR Bridge
04-05-2013, 03:08 PM
Virtually all Mom & Pop shops are still standing on 48th St. (the entire street is filled with'em. A touring guitarist's heaven) and all of the one's in NJ that pre-date the arrival of the big box stores are still there, too. Offering lessons and luthier services has saved their proverbial asses through the past couple of decades. It's not exactly an even comparison to the hardware store situation.

jhale667
04-05-2013, 03:18 PM
Virtually all Mom & Pop shops are still standing on 48th St. (the entire street is filled with'em. A touring guitarist's heaven) and all of the one's in NJ that pre-date the arrival of the big box stores are still there, too. Offering lessons and luthier services has saved their proverbial asses through the past couple of decades. It's not exactly an even comparison to the hardware store situation.

Yeah, the only place that tactic really worked was in smaller markets where the only other retailer in town couldn't keep up with them. A lot of the independent stores in L.A. ( with the exception of West L.A. Music, another former employer and iconic local biz, who they absorbed) are still here, and if they can't fully wipe out the competition in their own backyard...

ELVIS
04-05-2013, 04:36 PM
http://img.tapatalk.com/d/13/04/06/5uje8e3e.jpg
Ok, so I left my brick at home (probably for the best) and decided to take a closer look at this puppy. It is signed by Ed and does appear to be a back up 5150, but can't figure why the neck would be so beat.

It's not beat...

It's dirty from Ed's unwashed wino hands...

jhale667
04-05-2013, 08:43 PM
Some .000 steel wool and a bit of soap and water would have the thing looking like new... but then it wouldn't have Ed's finger cheese on it. Which would probably slightly devalue the piece as far as being a collectible... :biggrin:


And why does it look like it has a Duncan Invader in it... a pickup I've never heard of EVH using...? Thought it was just rust, but those look like hex poles...?

DLR Bridge
04-05-2013, 09:15 PM
You've got some good eyes. I was thinking the neck grit may be somebody else's as the silver paint marker signature looks like it's been smeared away from playing. Perhaps some lucky guy scored an autographed Ed guitar and didn't have the sense to leave it alone.

jhale667
04-05-2013, 11:29 PM
You've got some good eyes. I was thinking the neck grit may be somebody else's as the silver paint marker signature looks like it's been smeared away from playing. Perhaps some lucky guy scored an autographed Ed guitar and didn't have the sense to leave it alone.

Anything's possible, I guess. Once upon a time there was a guy I could've called that could tell us all about it, but fortunately for him he's moved on as well.


:guitar:

Matt White
04-06-2013, 04:41 PM
I loved rewatching the 1982 Kramer vid....& the maker talks aboot adding the wear marks to the guitar...to make it look like ED used it a bunch....."relic"-ing" in the 80's! Who knew?!?

jhale667
04-06-2013, 07:13 PM
I loved rewatching the 1982 Kramer vid....& the maker talks aboot adding the wear marks to the guitar...to make it look like ED used it a bunch....."relic"-ing" in the 80's! Who knew?!?

I gotta check that out again...

Mushroom
04-07-2013, 06:43 AM
Their corporate goal apart from being the Home Depot of guitars, was/is to "crush every other music retailer" - especially mom & pop stores. Good to see they may not succeed at that goal.

Guitar Center finally moved into my town about 5 years ago. One day, several years ago I visited my local guitar shop. I noticed there were two Gibsons left on the racks. I asked the clerk what happened? They said they are no longer licensed to sell Gibsons because GC moved into town. In short GC made a contractual agreement with Gibson that GC is Gibson’s exclusive dealer in our town. Good riddance GC, Karma wins again. I pledge allegiance to my local guitar shop!

ODShowtime
04-13-2013, 09:43 AM
Just don't be a failed hack guitar player.....remember, its nobody elses fault if you suck...only yours.

Put down the Ayn Rand garbage & pick up GUITAR WORLD.............;)

All you have to do is walk in there knowing you play better, more soulful guitar than any of the wankers, and knowing that you know how to extract the most vicious deal possible from them, separating them from their precious commissions, and you're fine.

Walked in 2PM last X-mas eve with a jones for a maple-neck American Standard Strat. Walked out at 3PM with the guitar I wanted at the exact price I wanted to pay. Now that pretty little baby with Alcino Vs has been recruited into my dark harem. (man I need to get my hands on her today...)

It's too bad romney and his bunch got their hands on them and saddled them with debt and then extracted all the cash for themselves, but that is what they do. Their goal is not to help. They are vampires. But then again so is GC.