By Andrew Catania
Guitar Center which is the largest chain of musical instrument retailer throughout the world has been faced with overwhelming financial hurdles, so much so that many people, for now, are insinuating that this could be the end of Guitar Center.
Guitar Center has incurred a lot of debt and most of which resulted from Bain Capital’s $2.1 billion private-equity buyouts of the company in the year 2007.
Will Guitar Center Survive this?
The situation of the company has necessitated many especially the musicians to be curious about the company’s way out of this messy hurdles of finance. But we must not forget the fact that, Guitar Center has navigated the recession fairly well and its revenues were about $2.2 billion in 2009.
Also in 2012, the company rebounded after a little dip, reaching around $2.1 billion, but presently the situation is that the debts weigh terribly on their balance sheet and that is a big reason to worry. However, there are signals that the company will bounce back considering how concurrently they are opening more stores and how long this has been.
Furthermore, Guitar Center is still a place many musicians do go for their gears, a place to explore new technologies, mingle with other players and of course shop bargains on supplies. So with their current dropping of price (30%), they will gain more traction and hopefully, comes out of this mess.
Causes of Guitar Center Debts
Like many other retailers, Guitar Center is suffering from the stiff competition of e-commerce that is vigorously weighing on business for many brick and mortar retailers. Pockets of musicians now buy gear online, the sales which would be part of Guitar Center’s business.
Their online segment has rapidly been sinking, with their sales dropping to 10 percent in 2012 and of course the business relationship between amazon.com and Guitar Center has ended. Amazon.com which is a major online instruments seller was an excellent customer of Guitar Center in 2007, quickly using the company to fulfill its orders on the queue.
It also saddens to know that, Guitar Center broke a very golden rule of a successful business in the 21st century by getting rid of many big brains in the company. To increase the sales pitch of any business online now and to makes the websites relevant is not as easy as a walk in the park.
This has dealt a devastating blow on the success of the company over time, and the company has to shoulder the responsibility for this behavior.
How Is Guitar Center Coping With The Debts?
Guitar Center has never for once closed a store in negation with so many people opinions of the end of Guitar Center. As a matter of fact, they are still opening stores every couple of weeks. So from this, it is evident that they are still getting good returns on investments and are still with huge profit margins as compared to the other retail industries.