Guitar Center to blow-out bass gear soon?

Jim Carr · #1 05-22-2009, 10:24 AM

GC has a very low credit rating (Caa1), and is in serious trouble.

According to money.cnn.com:
...Credit rating agency Moody's Investors service said earlier this month that credit conditions will worsen for sellers in the coming months.

The agency said in a report that it currently rates about 20% of retailers at "Caa1" or lower, "indicating our view that the number of defaults in the retail industry will rise in the next 12 months as the recession deepens."

Barneys, Blockbuster (BBI, Fortune 500), Eddie Bauer (EBHI), Claire's Stores, Guitar Center, Michael's Stores and Rite Aid (RAD, Fortune 500) are among the retailers that Moody's has rated "Caa1" or lower...

Check this article for the full text:

http://money.cnn.com/2009/05/22/news...ney_topstories

WalWarrior · #2 05-22-2009, 10:32 AM

Sheesh! And here I was thinking I'm single handedly keeping this store afloat.

Realistically, the only things I've purchased @ GC was my Markbass stuff, cables and stands, straplocks and an occasional book/DVD. I've never purchased any instruments from them other than a used Yamaha 6 string to test my extended range capabilities before taking the plunge on a quality instrument.

stflbn · #3 05-22-2009, 10:32 AM

I think individual stores will start dropping off the vine based on their sales volume before you see a mass franchise wide sell-off. Then GC will make a choice whether it's worth moving inventory to other locations, or just sell off that locations merchandise.

.

EagleMoon · #4 05-22-2009, 10:45 AM

As much as I dislike GC, I hate to see a company struggling.

BigOldHarry · #5 05-22-2009, 10:50 AM

Quote:

Originally Posted by EagleMoon

As much as I dislike GC, I hate to see a company struggling.

I would agree, were it not that GC had done it's level best to put every mom & pop music store in the country out of business. When GC was just a decent guitar store, with each store having its own character and selection, I liked it. No mas - they are Walmart.

I think that if GC closes some stores, that will be good for them AND us - they will be forced to deliver a better product. Besides, some of the GC locations just puzzle me. Pasadena? La Mesa? San Marco? Culver City? In SD, there used to be the downtown location and that suited me just fine - GC was there, as was Apex, American Dream and a few other stores - it was a one-stop shop (rather like Guitar Row in Hollywood is now). I'd be okay with seeing it go back to that arrangement.

KUNGfuSHERIFF · #6 05-22-2009, 10:53 AM

Not surprising. A rational person would expect that to happen when cyclical debt is a fundamental part of your business model. Sooner or later, the cheap credit dries up like all other resources do, and you're screwed. Look at all the cash they have tied up in stock, especially overpriced used gear, then consider the state of the debt market. That's a hell of an anchor to drag around.

There was a popular theory several years ago that urged companies to carry a lot of debt, which wasn't particularly expensive at the time, in order to make their companies less attractive to other companies considering a hostile takeover. Of course, that became a major problem when the market started to crash. The company I used to work for went on a buying spree and ended up on the wrong side of that equation and a lot of people got hurt. If you see GC's parent company drop off of the NY Stock Exchange, the end is near.

BigOldHarry · #7 05-22-2009, 10:54 AM

Excellent point. Remind us all who GC's parent company is, and what their listing symbol is, will ya?

Quote:

Originally Posted by KUNGfuSHERIFF

Not surprising. A rational person would expect that to happen when cyclical debt is a fundamental part of your business model. Sooner or later, the cheap credit dries up like all other resources do, and you're screwed. Look at all the cash they have tied up in stock, especially overpriced used gear, then consider the state of the debt market. That's a hell of an anchor to drag around.

There was a popular theory several years ago that urged companies to carry a lot of debt, which wasn't particularly expensive at the time, in order to make their companies less attractive to other companies considering a hostile takeover. Of course, that became a major problem when the market started to crash. The company I used to work for went on a buying spree and ended up on the wrong side of that equation and a lot of people got hurt. If you see GC's parent company drop off of the NY Stock Exchange, the end is near.

Eric Moesle · #8 05-22-2009, 10:59 AM

Every time I venture to Guitar Center they don't have what I ask for, and tell me I have to order it.

1. Flatwound 5 string bass strings? "No, but we can order it for you."

2. Aphex Punch Factory pedal? "No, but we can order it for you."

3. Five string jazz pickups? "No, but we can order it for you."

4. Demeter Compulator? "No, but we can order it for you." (No, they can't. They can't get them)

They make themselves obsolete. If I want to order something, I'll order it online myself that way I don't have to drive back to the store.

azarias · #9 05-22-2009, 11:03 AM

Quote:

Originally Posted by Eric Moesle

Every time I venture to Guitar Center they don't have what I ask for, and tell me I have to order it.

1. Flatwound 5 string bass strings? "No, but we can order it for you."

2. Aphex Punch Factory pedal? "No, but we can order it for you."

3. Five string jazz pickups? "No, but we can order it for you."

4. Demeter Compulator? "No, but we can order it for you." (No, they can't. They can't get them)

They make themselves obsolete. If I want to order something, I'll order it online myself that way I don't have to drive back to the store.

Exactly. And the same thing started happening at the other stores in my town after GC and Sam Ash showed up. Here, there is simply tooo much competition. NONE of the stores can afford to have a decent selection on hand. It was like this before the economy slowed down.

ErebusBass · #10 05-22-2009, 11:03 AM

Quote:

Originally Posted by BigOldHarry

I would agree, were it not that GC had done it's level best to put every mom & pop music store in the country out of business. When GC was just a decent guitar store, with each store having its own character and selection, I liked it. No mas - they are Walmart.

I think that if GC closes some stores, that will be good for them AND us - they will be forced to deliver a better product. Besides, some of the GC locations just puzzle me. Pasadena? La Mesa? San Marco? Culver City? In SD, there used to be the downtown location and that suited me just fine - GC was there, as was Apex, American Dream and a few other stores - it was a one-stop shop (rather like Guitar Row in Hollywood is now). I'd be okay with seeing it go back to that arrangement.

Can't say I'd be too sad. When GC moved to town two of my favorite stores went out of business.

KUNGfuSHERIFF · #11 05-22-2009, 11:08 AM

Quote:

Originally Posted by BigOldHarry

Excellent point. Remind us all who GC's parent company is, and what their listing symbol is, will ya?

Bain Capital Partners, LLC is their name, but I don't see them on the NYSE list. I do see, however, that they own parts of Burlington Coat Factory, Clear Channel, Warners, and Burger King among other things and tried to buy the NHL. What a menagerie.

To amend my earlier point, I'm tempted to agree that they will have a fire sale at some point to cut their losses if the free-fall continues, but I wouldn't venture to guess what form that would take. I can say with confidence that these guys hate to lose money, and will fight tooth and nail to recover their investment, so don't start counting those discounts yet.

mndean · #12 05-22-2009, 11:09 AM

Main Street is going to be hard hit (when you see the unemployment stats, you can tell this is not going away so quick), and cost of credit is one of the biggies that's going to hurt or kill a lot of chains. At least one chain on the list above I will be glad to see gone, and it isn't GC, which would be a "meh" if it left our city. It's good for some things, but a place that doesn't even have short scale flatwounds? Bah, begone with them.

mndean · #13 05-22-2009, 11:10 AM

Bain Capital, well, well. Clear Channel is in a heap of trouble already. I bet they try shedding as many of the nonperforming assets as they can.

stflbn · #14 05-22-2009, 11:17 AM

Quote:

Originally Posted by KUNGfuSHERIFF

I can say with confidence that these guys hate to lose money, and will fight tooth and nail to recover their investment, so don't start counting those discounts yet.

A likely 'solution' will be spending huge chunks of money on advertising offering credit to musicians. More than they offer now.

EagleMoon · #15 05-22-2009, 11:18 AM

One other bad thing about stores like this going out of business is that they leave such a big hulking space empty. There's something so depressing about seeing these great monolithic, bare-boned skeletons littering the landscape.

BillyRay · #16 05-22-2009, 11:19 AM

funny how things work. In the 50's, mail-order was a big thing. My grandma almost never went to stores, except maybe for the big Sears or La Baie trip once a year for fancy clothes and houseware. Everything else, mail-order.

Toys for the kids ? Mail-order.
Shovel ? Mail-order.
Everyday sweater ? Mail-order.
Bras ? Mail-order.

Then malls started appearing and space wasn't as much as a premium. Big speciality shops such as Guitar Center started to appear in the suburbs. Then the Internet, where everything is cheaper because of less overhead and even more specialization.

We might have to start to mail-order our amps, guitars and other toys pretty soon. At least for obscure stuff. Fender, Gibson et al. will always have plenty of stuff to try out, but the smaller guys. Traben ? Aria ? Or the semi-boutique stuff ? ERB ? EUB ?

Mail-order, or at least internet order. Saddens me, but this is the way the music market seems to be evolving.

jojobean39 · #17 05-22-2009, 11:22 AM

I don't understand why everyone hates GC so much. I understand that they have made it more difficult on smaller businesses, but they have also kept the market competitive, much like the internet has done. I don't know too many people who would wish ill on the internet shops. GC has a lot of douchy, unknowledgable workers, I agree. But they do offer a service. I have bought a couple of things from them at a great price. I never buy new, but their prices on some items are absolutely insane, if you just catch them at the right time. If I can get another smaller store to match GC's prices, I'll always go with them. But, if it comes down to it, 9/10 times I am going with the lowest price. Not everyone is like that, but I would venture to say many are.

On another note... the local GC has an F Bass I am really interested in, so a fire sale wouldn't make me cry. ;-)

BillyRay · #18 05-22-2009, 11:23 AM

Quote:

Originally Posted by EagleMoon

One other bad thing about stores like this going out of business is that they leave such a big hulking space empty. There's something so depressing about seeing these great monolithic, bare-boned skeletons littering the landscape.

... like temples to our consumer-driven society. Now, now, I'm starting to sound like a bad 80's patronizing, pseudo-apocalyptic movie

BigOldHarry · #19 05-22-2009, 11:24 AM

GC is owned by Bain Capital group (bought them out a while back). They appear to be one of those mega-giant companies that sells guitars, baby food and nerve gas. Another reason to avoid GC.

KUNGfuSHERIFF · #20 05-22-2009, 11:25 AM

Quote:

Originally Posted by EagleMoon

One other bad thing about stores like this going out of business is that they leave such a big hulking space empty. There's something so depressing about seeing these great monolithic, bare-boned skeletons littering the landscape.

The Mars Music store in Albany, NY is still empty and looks EXACTLY like it did when it closed (2002?). Very depressing.

It would be surprising to see GC double down and extend credit to musicians (who are usually so responsible with money!) after Bain's credit rating was downgraded. I figure they'll try to find a way to make more money on existing credit despite the consumer protection legislation Congress passed this week.