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So, what if Guitar Center DOES go under...

#21
I guess I should appreciate my GC more. It has a fabulous selection of guitars....and a fair selection of basses. ( I got my Warwick there..) The amps section for both is fair at best. The used selection is great. The other categories in the store are adequate.

I think there will ALWAYS be a demand for brick and mortar stores for things like instruments. As many people who will buy on there internet- there's as many or more who won't buy without trying it out first. GC will do what it has to do, but there will still be mom and pop stores around..... possibly even more.
 
#23
All retailers have a life cycle. It has been that way since the beginning of commerce.
Companies grow to large to be managed properly and then they fail. As soon as that happens another company moves in and fills the void. The new company is focused upon customer service to "buy the market share". They, in turn, grow too large. Customer service suffers and core values erode because of higher profit goals and it happens all over again.
It is actually a good thing for consumers because they once again become important to the newly emerging business.
 
#24
Guitar Center has had a hard time paying off the huge debt that Bain Capital saddled them with, and the last 2-3 years looked grim. However, their belt-tightening seemed to have worked. Reports from my associates that deal with them is that they are pulling out of it, paying bills off and in general, doing better.

I think that after they get out from under the debt mountain, they can start to expand again, carrying more products and improving service.
 
#25
Michedelic said:
I realize that realistically the investors or the board won't let it happen completely, but then again Borders Books limped along for a long time before it fell. JC Penny is wobbling; they weren't doing too well, then they did that weird pricing thing that really damaged their PR. Best Buy, are they on life support yet? Anyway...will GC throw their Starbucks-like expansion in reverse, closing a big number of stores? Shave their inventory down to convenience store variety, &/or folding it all into Musicians' Friend? How much is Fender gonna get hurt? Will there ever be a resurgence of the mom'n'pop, especially if GC would severely downsize or dissapear? Or has the internet totally destroyed brick & mortar music retailing? Let's hear some theorizing...
Click to expand...

So long as Guitar Center remains under the thumb of Bain Capital, anything is possible - except wild, raving success and great prosperity. Bain is a corporate parasite, acquiring thriving companies - generally with other people's money - then methodically sucking them dry, burdening them with debt...and when they ultimately go out of business, selling off what's left for whatever the market will bear.

Bain and its investors make out like bandits. Literally. And even the executives of their victim companies often get golden parachutes. But the ordinary wage-earning grunts? The ones who must suddenly perform the work of two jobs - at half the pay? Those whose jobs ultimately get flushed down the rat hole, through no fault of their own? Well, they're obviously not important. What's really important is that Bain "earns" $20 billion in its next fiscal year - rather than the mere $19 billion they would have received - if they had chosen to treat people better. :eyebrow:

Hey! That's the American way, right? Why would we want to "punish" the "job creators"? :atoz:

MM
 
#27
Space Pickle said:
Actually, this is incorrect. I don't know much about Guitar Center specifically (not American) but in the guitar shop business the real money is in student model gear, not high quality stuff.
Click to expand...

Typical talkbass response. You didn't read or understand the entire post.
GC ALWAYS sold entry level instruments and cheap gear, it's when they started carrying ONLY these items that their demise began, and it was swift.
 
#28
prd004 said:
Typical talkbass response. You didn't read or understand the entire post.
GC ALWAYS sold entry level instruments and cheap gear, it's when they started carrying ONLY these items that their demise began, and it was swift.
Click to expand...

They sell plenty of instruments at all levels, and at a pretty nice margin. The only problem with GC is Bain. Although the ever expansion of stores isn't cheap either, but hey more for Bain to leverage and proof positive that people should keep lending GC money!
 
#29
Itzayana said:
While it is true that Bain Capitol is a corporate vampire, Mitt Romney is a real nice guy. Some might say he is a first class sweetheart the way he shows great concern for the workers.
Click to expand...


Darnit, I was looking for the "vomit" emoticon and couldn't find it.

GC used to be much cooler and would actualy bargain with you. Not anymore for a long time now. I have to say that their used website is way better than ebay, though.
 
#30
I don't think that Guitar Center would go out of business completely. Too many of their stores service areas where there aren't alternatives, or they are local hot spots like the Sunset Blvd. store. I worked for them back in the late 90s and at the time they had a good working model. I don't know if things behind the scenes have changed much, but working there has always been sink or swim. That's the nature of commission based sales.

There is a love/hate relationship with brick and mortar retail. Of course everyone wants the best price, but when it comes to some items like a bass or clothing, I want to check it out first. I don't understand buying something as particular as a musical instrument online because you don't know what you are going to get. Even if you try one somewhere else, that doesn't mean the one you are buying online isn't a dud.

My personal gripe with physical retail vs. online isn't price, it's selection. You couldn't build big enough or close enough stores to meet my purchasing needs. I'll buy stuff in a physical store if I can find it, but that keeps getting harder and harder, which of course is a catch-22. Tower, Virgin and Amoeba as big as they are (were) don't have what I want in stock. The biggest Barnes and Nobles can't house every book published. No computer store ever seemed to have the exact part I needed. Guitar Center or Sam Ash would have to build stores the size of a Macy's to house a thorough selection of equipment. I would prefer to pay a little more in a store if someone just had something I wanted to give them my money for.
 
#31
fisticuffs said:
They sell plenty of instruments at all levels, and at a pretty nice margin. The only problem with GC is Bain. Although the ever expansion of stores isn't cheap either, but hey more for Bain to leverage and proof positive that people should keep lending GC money!
Click to expand...

Not like they uses to. Not even close.

I worked there in the mid nineties and the bass department had multiple Rickenbackers on the wall, including 63 re-issues, multiple Fender Custom Shop instruments, a Warwick section, and I mean section not a couple basses, a Zon section, a whole Fender wall ( real Fender), a slew of vintage basses, heck, there were so many "nice" basses and amps that the Squires and MIM Fenders hardly made it onto the floor. Heck we even had lefties in stock.

In those days they carried all the amp makers that were new and hip or tried and true. SWR, Eden, GK and Ampeg. Plus, they had them in stock and on the floor all the models combos, cabs etc.

When I walk into a GC today (and it doesn't happen very often), I almost walk straight past the bass section because there is little to nothing of interest. My guitar playing buddies will echo the exact same story regarding that section.
 
#32
prd004 said:
Not like they uses to. Not even close.

I worked there in the mid nineties and the bass department had multiple Rickenbackers on the wall, including 63 re-issues, multiple Fender Custom Shop instruments, a Warwick section, and I mean section not a couple basses, a Zon section, a whole Fender wall ( real Fender), a slew of vintage basses, heck, there were so many "nice" basses and amps that the Squires and MIM Fenders hardly made it onto the floor. Heck we even had lefties in stock.

In those days they carried all the amp makers that were new and hip or tried and true. SWR, Eden, GK and Ampeg. Plus, they had them in stock and on the floor all the models combos, cabs etc.

When I walk into a GC today (and it doesn't happen very often), I almost walk straight past the bass section because there is little to nothing of interest. My guitar playing buddies will echo the exact same story regarding that section.
Click to expand...

Yeah the smaller shops have pretty uninteresting inventory. One of many reasons I don't need to walk in the door.
 
#33
The local GC out here isn't so bad. Their wall of bass guitars isn't 100% stellar, but it's not a total dud, either. They aren't the best place, but they are OK. They generally have what I'm looking for if the mom & pop stores I prefer don't have it. If I have to order something, I do it through the locals most of the time, not GC, although that isn't a hard and fast rule. The staff here seems reasonably knowledgable, relative to what others report on TB.

Back to the original question - I don't think much of anything would change in Seattle. What would change is that I wouldn't have a convenient place to use for out of town practice on a borrowed instrument. Being able to find a GC somewhere when I'm traveling for work is a real blessing, since they don't seem to mind if I go there and play an instrument for an hour, unplugged, off in a corner somewhere. No need to schlep a bass along with you.
 
#34
MysticMichael said:
So long as Guitar Center remains under the thumb of Bain Capital, anything is possible - except wild, raving success and great prosperity. Bain is a corporate parasite, acquiring thriving companies - generally with other people's money - then methodically sucking them dry, burdening them with debt...and when they ultimately go out of business, selling off what's left for whatever the market will bear.

Bain and its investors make out like bandits. Literally. And even the executives of their victim companies often get golden parachutes. But the ordinary wage-earning grunts? The ones who must suddenly perform the work of two jobs - at half the pay? Those whose jobs ultimately get flushed down the rat hole, through no fault of their own? Well, they're obviously not important. What's really important is that Bain "earns" $20 billion in its next fiscal year - rather than the mere $19 billion they would have received - if they had chosen to treat people better. :eyebrow:

Hey! That's the American way, right? Why would we want to "punish" the "job creators"? :atoz:

MM
Click to expand...

I read that Rolling Stone piece about how Bain takes over companies and bleeds them dry. They the borrow 80%-90% of the capital from banks like Goldman Sachs to purchase a company like Guitar Center and then GC is stuck paying back the loan to Goldman Sachs. Then Bain charges them millions in consulting fees so no GC has two new giant overheads before they can make a profit.

"Once all that debt is added, one of two things can happen. The company [Guitar Center] can fire workers and slash benefits to pay off all its new obligations to Goldman Sachs and Bain, leaving it ripe to be resold by Bain at a huge profit. Or it can go bankrupt – this happens after about seven percent of all private equity buyouts – leaving behind one or more shuttered factory towns. Either way, Bain wins. By power-sucking cash value from even the most rapidly dying firms, private equity raiders like Bain almost always get their cash out before a target goes belly up."
 
#35
Itzayana said:
All retailers have a life cycle. It has been that way since the beginning of commerce.
Companies grow to large to be managed properly and then they fail. As soon as that happens another company moves in and fills the void. The new company is focused upon customer service to "buy the market share". They, in turn, grow too large. Customer service suffers and core values erode because of higher profit goals and it happens all over again.
It is actually a good thing for consumers because they once again become important to the newly emerging business.
Click to expand...

+1
We're seeing the identical scenario playing out at Men's Wearhouse ...
 
#36
Duuuuuuuuuude said:
I read that Rolling Stone piece about how Bain takes over companies and bleeds them dry. They the borrow 80%-90% of the capital from banks like Goldman Sachs to purchase a company like Guitar Center and then GC is stuck paying back the loan to Goldman Sachs. Then Bain charges them millions in consulting fees so no GC has two new giant overheads before they can make a profit.

"Once all that debt is added, one of two things can happen. The company [Guitar Center] can fire workers and slash benefits to pay off all its new obligations to Goldman Sachs and Bain, leaving it ripe to be resold by Bain at a huge profit. Or it can go bankrupt – this happens after about seven percent of all private equity buyouts – leaving behind one or more shuttered factory towns. Either way, Bain wins. By power-sucking cash value from even the most rapidly dying firms, private equity raiders like Bain almost always get their cash out before a target goes belly up."
Click to expand...
This is the procedure the Mafia used as described in the book Wiseguy which is better known for its Oscar winning feature film portrayal Goodfellas. Get in, leverage debt, massive profit taken out, shell business eventually folds. When done by the mob, it's illegal. When done by a future presidential candidate it's "job creation."
 
#37
fisticuffs said:
I think that when the shoe drops GC/MF will just restructure, claim bankruptcy etc. Privat equity will make out like a bandit, everyone else will be left holding the bag.
Click to expand...
False. If bankruptcy were so profitable, private equity firms would make no attempt to make the companies which they acquire profitable, and would file for bankruptcy as soon as acquiring them. Bain paid a 25% stock price premium when they acquired it in 2007, taking it private. They have a lot of money tied up, and bankruptcy would erase much of it.

Also, anyone who lends money to Guitar Center Holdings at this point, when their corporate bond rating is at junk status, knows *exactly* what risks they are taking. I feel no remorse for the high-risk lenders whatsoever if the company files bankruptcy and they can't recoup their money. If they're left "holding the bag" they deserve it; that's the game they're playing. (They charge the most interest.)
 
#39
Troph said:
Also, anyone who lends money to Guitar Center Holdings at this point, when their corporate bond rating is at junk status, knows *exactly* what risks they are taking. I feel no remorse for the high-risk lenders whatsoever if the company files bankruptcy and they can't recoup their money. If they're left "holding the bag" they deserve it; that's the game they're playing. (They charge the most interest.)
Click to expand...

But the problem is that GC acquires it's inventory on credit. I think Fender sees the writing on the wall and this is the real reason they are going to sell directly to customers through their website. When Fender almost went public they listed Guitar Center as a major risk on their S-1 form.

"We are subject to credit risk associated with our largest customer.

Historically, a significant portion of our domestic net sales has been generated by our largest customer. As a result, we experience some concentration of credit risk in our accounts receivable, with Guitar Center and its affiliates representing an aggregate of $8.7 million, or approximately 13.8%, of our accounts receivable as of January 1, 2012. In November 2010, Moody’s Investors Service downgraded Guitar Center’s corporate family rating and probability of default rating to Caa2 (which Moody’s defines as “poor standing and subject to very high credit risk”) from Caa1, citing Guitar Center’s highly leveraged capital structure and heavy interest burden. Moody’s affirmed Guitar Center’s Caa2 rating on February 29, 2012. These factors make Guitar Center more vulnerable to any deterioration in its financial performance, whether as a result of adverse economic conditions or otherwise. A substantial majority of our accounts receivable, including all of our accounts receivable from Guitar Center and its subsidiaries, are not covered by collateral or credit insurance."

If one or more of our significant customers were to experience serious financial difficulty, as a result of weak economic conditions or otherwise, and were to reduce its inventory in one or more of our products or limit or cease operations, our business and results of operations would be significantly harmed. Consolidation of our customers in the future or additional concentration of market share among our customers may also increase the concentration of our credit risk."
 

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