Guitar Center Faces Imminent Bankruptcy After 59 Years In Business

Guitar Center on Pico Blvd. in Los Angeles (photo: Cbl62 CC 3.0)

Guitar Center on Pico Blvd. in Los Angeles (photo: Cbl62 CC 3.0)

As guitar sales plummet, some of the biggest guitar brands and retailers are facing bankruptcy.  The latest is Guitar Center, which narrowly averted default and just got downgraded by S&P.

Rock n’ roll may never die.  But that’s little consolation to businesses based on the once-unstoppable genre and its storied instrument, the guitar.

Earlier this year, creditors and analysts pointed to a deteriorating financial crisis at Gibson Guitar, with a bankruptcy anticipated as early as this summer.  Now, you can add Guitar Center to the watch list.  Just this week, leading rating agency S&P downgraded Guitar Center to a ‘CCC—’, indicating serious risk of bankruptcy.

Guitar Center, Inc. is the largest instrument retailer in the United States with nearly 280 locations.  The retailer actually got started as ‘Organ Center’ back in 1959, but eventually shifted to ‘Guitar Center’ in the 70s.  That was an obviously smarter choice, with the guitar dominating the instrument landscape for nearly 40 years afterward.

Earlier this month, Moody’s warned investors of an expected default with bondholders.

But Guitar Center narrowly averted that classification with an emergency loan renegotiation involving debt surpassing $615 million.  Accordingly, early this morning (April 17th), Moody’s noted that it did not consider Guitar Center to be in default.  Instead, the rating agency upgraded the retailer slightly to indicate solvency.

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“All of today’s rating actions are in response to the closing of an exchange offer that was announced by Guitar Center this past March,” wrote Keith Foley, a Senior Vice President at Moody’s.

But Moody’s reiterated that this was still a troubling situation.  “The rating outlook remains negative,” the agency stated.

In total, Guitar Center is juggling more than $1 billion in outstanding loans.

In its rating downgrade, S&P indicated that Guitar Center was ‘vulnerable’ to a bankruptcy filing or credit default.

Any shock to the system, including an economic downturn, could plunge the retailer into a crisis.  That ‘shock’ could also include a sharper nosedive in guitar sales, already an instrument under duress.  According to the Washington Post, annual guitar sales slipped from 1.5 million to 1 million leading up to 2017, suggesting that annual sales are currently below the million-mark.

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That is punishing the largest manufacturer of guitars in America, Gibson Guitar.  In February, bankruptcy fears surrounded Gibson, which faces more than $500 million in debt obligations this summer.  “This year is critical and they are running out of time — rapidly,” Kevin Cassidy, a senior credit officer at Moody’s Investors Service told the Nashville Post.  “And if this ends in bankruptcy, [Gibson CEO/owner Henry Juszkiewicz] will give up the entire company.”

Of course, the fates of both Guitar Center — the largest guitar retailer in America — and Gibson — one of the largest guitar manufacturers — are intricately linked.  In both cases, these businesses have been unable to adapt to a precipitous slide in guitar sales.  Younger buyers, who once drove the guitar surge, have now shifted towards EDM, rap, and less guitar-driven indie music — even though interest in music itself has never been higher.

But replacing the guitar with something else isn’t so simple.  Instead of guitars, young producers and artists are often making beats on laptops, with piano keyboards sometimes an accessory.  But even selling ‘everything’ — drums, keyboards, trumpets, mics, etc. — only solves part of the problem.

Especially for a company saddled with so much debt.

 


 

 


67 Responses

    • Freddie

      The guitars are just too expensive for average enthusiast, even the used ones, the cheap ones are just
      total trash.

      Reply
      • Anonymouse

        That’s not entirely factual, most cheaper guitars are more well built than they ever have been in history.

        Reply
        • Anonymous

          Very true. CAD-CAM has increased consistency 500% and brought production costs down (less people unfortunately) which means decent options from companies like Fender start around $100. Now, if you’re talking Gibson or Fender Custom Shop, those prices are extremely high mainly due to the human factor. But, most players don’t need a $4,000 guitar. There are many great options – PRS SE – for one.

          Reply
          • Nick

            You nailed it. I collect vintage basses and they are special. Many Squires and other inexpensive basses look and play great. Pro level at a fraction of costs.

        • Anonymous

          Correct. My Squire Matt Freeman P-Bass is great for 380 bucks new.

          Reply
      • Chris D

        Also, kids these days dont play guitar anymore, they do PS4 and all theat stupid crap…also no more guitar geroes like Van Halen, Jummy Page and Claptons…guitarist now are boring!

        Reply
        • Greg

          Edward “Eddie” Van Halen is NOT a guitar hero. He may have bore some resemblance to a guitar hero DECADES ago, but he’s just milking his old celebrity status. EVH is a bitter, cantankerous old bitch. He doesn’t get along with ANYONE. The man has never released a solo album and he’s kept alive by 50-something old fans who are still dazzled by something he did 40 years ago that had been done for EONS, just never on an electric guitar and with the popularity he had. Timing is everything. Joe Satriani, Guthrie Govan, Martin Miller, John Petrucci… THOSE men are guitar heroes. Not the brooding little bitch EVH

          Reply
          • Al Snug

            You’ve missed the point. He said there are no guitar heroes TODAY, to which you reply Eddie isn’t a hero TODAY.

          • DryDog

            Ed did receive a US patent on his D-Tuna invention as well as creating some uniquely recognizable sounds on his work. So I wouldn’t sell him too short.

        • Rory

          Music changes all the time so why would you expect listeners to want today’s music to sound like something out of the ’60’s or ’70’s. I hear that argument all the time. I have been a guitar and bass player for 40 years and been playing in bands around Minneapolis and St Paul for almost as long. I have changed my playing styles for both instruments over the years because 1) I got more experienced and better and 2) to keep from becoming bored. The current guitar players aren’t necessarily less talented than the guitar “gods” of past decades but have most likely made a conscious decision to sound different than their predecessors. This is a good thing because it keeps rock fresh and evolving.

          Reply
        • Ross

          No guitar heroes today? Gary Clark Jr? John Mayer? Jack White?

          Reply
      • Greg

        Freddie, you don’t know your ass from a hole in the ground. Even the low end “student” edition guitars are better than ever before with modern building technics. The cost of a Fender Squier is what you might pay for a month’s worth of lessons with a decent teacher. Gibson is the most guilty for “overpriced” guitars. Harley Benton is one of the cheapest guitars around (Thomann) and Ibanez provides quality guitars in all price ranges. Hell, you can get a PRS for $500! I paid my way through my kid’s trombone, cello and violin. I suspect you are one of these “average enthusiasts”. Guitar Center failed for a reason (and so is Gibson). Guitars will always be around. It may not be as lucrative a business for just anyone in this day and age. Guitar Center is a piss poor example of a guitar store. Lazy, unaccommodating, unknowing employees… Inability to keep items in stock that people are looking for. My last 5 visits to GC were all the same. I walked in to a nearly empty store. There were enough employees staffed to handle a crowd and NO ONE asked if I needed any help. They’re either kids who are too busy with their faces buried in their phones or older guys who don’t know anything. There’s nothing wrong with the guitars and there’s a price point for EVERYONE. The quality of guitars has never been better. You can get a guitar that looks and plays like something 4 to 5 times it’s price. In fact? I’ll go as far as to say the most you should ever pay for a QUALITY guitar would be $2K. Anything beyond that is furniture… (fancy woods, hand built, etc.). You sound like someone peeved because they suck on the guitar. Rage on “average enthusiast”

        Reply
        • Kenny

          Same here…my last few visits to GC have been non-eventful. Employees could care less if you’re there, and seem pissed that they even have to ring you up. Fortunately for me, all the drum accessories I need are no longer behind a counter, since there’s nobody in the department…I can get them myself.

          It’s sad. I used to like going in there…now they’re driving me to shop on Amazon. THEY are doing it.

          Reply
        • Bill C.

          I am a VERY satisfied customer of the Guitar Center in Springfield, Missouri; it is the only one I’ve ever visited, but they, at least, are very knowledgeable and helpful. ‘Sure hope they don’t go out of business.

          Reply
      • Aiden Lautt

        they also sell synths, DJing materials, mics, and monitors, which are things many laptop producers need. You’d think people would be lining up to test em out. Most of us like testing out hardware before buying, that’s one advantage a place like GT has.

        Reply
    • Anonymous

      My children have been influenced by music their whole life. We all play multiple instruments and sing. I believe it has molded them into the men they are today. If we would turn our children toward music and away from video games I think it will be better for the next generation. It may not help Guitar Center or Gibson but turning to music instead of a video game that teaches violence would help them cope with issues in life. I know it does for me.

      Reply
    • Mark Ballard

      Fake news that their S&P rating plummeted to a CCC- rating? Do you have some alternative facts that we don’t know about? lol

      Reply
      • Anonymous

        The headline said “Guitar Center Faces Imminent Bankruptcy After 59 Years In Business” – not that their S&P rating plummeted – so the headline is fake news.

        Reply
        • J. D. Sloan, MBA Finance

          Hahahhaha. They’re done. They’ll be closing stores within 6 months. Layoffs will be first.

          Reply
    • Vail, CO

      Look it up: Moody’s stated Guitar Center was about to enter into default. They barely dodged a bullet.

      Reply
    • Greg

      Ummmm… “Seeking” and “exploring” debt restructuring are a far cry from actually doing it. Are you GC management or a “pee-on”. I will be happy to see the GC in my city close. The local mom and pop shop’s wall of guitars might not be as large? But, their employees jump out of their chairs the moment I walk in the door to greet me and ask if I need help and they are much more knowledgeable than the lazy clowns at GC. Gibson will restructure or someone will buy them. The Gibson brand will continue, GC is the Kmart/Sears of guitar stores. Goodbye GC, good riddance.

      Reply
  1. Geoff Edwards

    Bain Capital strikes again. Bankrupting more American successful companies than Donald Trump.

    Reply
    • MR

      Bain Capital sold GC back in 2014. It’s now owned by Ares Management. A company insider who works at the Westlake CA HQ told me GC is solid and sales are good.

      Reply
      • Brent

        Yeah, dude keep believing that. Oh and it is Amazons fault.

        Debt is taking all of these companies to Davey Jones’ locker. Just ask Toys R Us.

        Reply
      • Greg

        Pull this leg, it plays jingle bells. Do you know anything about finance? I work for one of the biggest brokerages in the US. Can GC recover? Sure they can! Is it likely? Short selling and put options in GTRC, that’s what I would do…

        Reply
  2. Geoff Edwards

    Bain Capital strikes again. Bankrupting mosuccessful companies than Donald Trump.

    Reply
      • Dan W

        They only sold off controlling interest. They still own part of the company and sit on the board of directors. Guitar Center’s financial road map is still being influenced by decisions at Bain Capital.

        Reply
    • Johnny

      Expect half the music instrument manufacturers to shrink drastically or go out of business if that happens. Love them or hate them, the MI industry needs them.

      Reply
  3. Jason

    Have you been to a guitar center in the last 5 years? It’s obvious they’re going out of business any second.

    Reply
  4. Anon

    Breaks my heart ………….NOT
    They have managed to close almost every independent music store in the country…. (ours included) …. poetic justice folks. Couldn’t care less.

    Reply
    • Johnny

      Expect half the music instrument manufacturers to shrink drastically or go out of business if that happens. Love them or hate them, the MI industry needs them.

      Reply
    • Greg

      I agree with Mark Ballard. Your statement carries about as much weight as the idiot that popularized that statement “fake news”. Just because you call it that? Doesn’t make it so… Please, thrill me with your acumen! How is this fake news? Are they lying about S&P lowering their rating AGAIN!?!!?!? How about you check your facts idiot. Would you like to invest in some GTRC options? Which way should you go? Funny you should ask… Put your wallet where your mouth is troll.

      Reply
      • Anonymous

        The headline is “fake news” nothing about lowering the credit rating, that would have been more accurate.

        Reply
  5. Mark Ballard

    Fake news that their S&P rating plummeted to a CCC- rating? Do you have some ‘alternative facts’ that we don’t know about? Please share em’ if so! lol

    Reply
  6. Stephen Parker

    Why are they a billion dollars in debt ? Because directors and shareholders have taken the money out in the past , banking on future profits……that will never be banked.

    Reply
    • clark

      They’re 1.1 billion in debt because they have violated all the basic business rules.
      Selling your products for less than a fiscally viable profit WILL bankrupt you no matter how much volume you sell. and anyone who thinks that those HIGH RENT stores will generate enough sales to offset they’re costs.. are just smoking crack.
      Musical instruments should NEVER be sold on a volume basis. the world just doesn’t need that many instruments. and its never gonna be a sustainable business model, it simply has to burn itself out at some point.. Thankfully, we have reached that point.

      Reply
  7. Kenny Lee

    I worked as an assistant store manager, a sales manager, and an artist relations sales manager at the flagship Hollywood store from 2003-2006. It was a great company with excellent customer service. Then Mitt Romney and Bain Investments bought the company, sold off the stocks and privatized it. It was then run like a Best Buy and all the seasoned veteran sales staff was cast aside for minimum wage college grads and starving musicians. They screwed the pooch and are now paying the price. I guess Gordon Gecko was wrong afterall. Greed isn’t always so good. See ya

    Reply
  8. Steve G.

    So what comes first the Guitar Center bankruptcy or Gibson Guitar BK ? Is this like what came first, the chicken or the egg scenario? Both are in a symbiotic relationship that is heading down the crapper fast, very Staind around the bowl…So…WHO’s Next, (pardon the R&R puns) Fender? Remember, Papa was a Rolling Stone…so maybe there is hope again for the Ma and Pa shop after this shakeout? It’s a Heartache and a Bitch, at least they won’t have to drive a Crazy Train with their monthly quotas in the 1,000’s per store with crazy overhead,while managers going Crazy on You to Sell Sell Sell…It just seems we are On A Road To Nowhere when it comes to future Guitar players that want to be a Jukebox Hero…The Waiting Is THe Hardest Part

    Reply
  9. Disgruntled

    My boyfriend works at one of their flagship stores. This is one of the reasons why they have so many lawsuits filed against them by former and current employees. Just google “guitar center lawsuits.” Their managers regularly use ILLEGAL labor practices. When confronted, they lie, saying their misdoings are corporate policy, when it goes directly against state and federal law. They deserve this. If you want a good guitar, go to Sam Ash or Sweetwater. These guys don’t deserve your money.

    Reply
  10. JD

    The only thing I learned in reading these comments is that financial geniuses are pompous assholes.

    Reply
  11. Stephen

    Gibson’s financial issues have nothing to do with any dip in guitar sales. They purchased other companies that are not pulling their weight…

    Reply
  12. Bob

    Not once did I ever feel I got a deal at Guitar Center. I’ve spent thousands there over the years. I remember in the 1980’s racing to get there before they closed after hearing a radio ad about Marshall Stacks on sale. When I arrived, they were these mini practice amps. They deserved to go out of business that day.

    Reply
  13. Bill Rosenblatt

    I recently bought our 14-year-old son his first guitar. We shopped at Guitar Center and Sam Ash. Lots of overlap in brands carried; BIG difference in stock and service. Sam Ash is just a better experience. Guitar Center is a place to go and try a bunch of guitars (amid the cacophony of two dozen other people doing the same thing) with no supervision or help, and then leaving without buying anything.

    Agree that many of today’s budget-priced guitars have surprisingly good quality. We bought a Korean-made PRS that was almost (*almost*) as good as the US-made version for well below $1000 – an excellent instrument that will last a long time and not go out of style.

    Reply
  14. Ed

    The reason for all this is the younger generation like video games and i Phones not learning to play musical instruments.

    Reply
  15. Jay

    Blaming a failing guitar sale is ridiculous: guitar as an instrument is doing just fine and Gibson is failing because they started relying on their name too much while they let their quality go to shit and their prices stay high. Guitar Center is just a shitty place to buy a guitar- they have unreasonable markups, shit customer service, and just feel gross to walk in to.

    Reply
  16. Thomas

    GC will not last much longer. Since the company went private it has gone down hill. The employees now have no clue what they are selling and all of the good guys are gone. The stores don’t stock any high end audio gear, you have to have them order it. There was a time when they had $2000-$3000 mic pres and outboard gear in stock. Now everything is under $1000.00. It’s not the same anymore. Back in the day everyone at upper management were musicians and now they all come from various retail companies and they don’t understand that musicians have passion. The passion is gone.

    Reply
  17. Falcon HZ

    As a kid (18-25) I went to GC to buy guitars. Very few times they treated me nicely though I was a paying customer. As I grew older and wiser I began defending myself verbally but I was still buying. One day I realize I didn’t need more humiliation from them and stopped going to GC completely. I am an active musician still and for 15 years I shopped elsewhere. THey lost a continuing paying customer (me) due to their poor, insulting service.

    Reply

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