I came across this story.... the inner workings of GC
 
http://thetoneking.com/wp/the-debt-pyramid-how-guitar-center-paid-its-april-2013-obligation/
 
 

I've been following this since last summer. Bain Capital paid over a billion for GC back in 07. GC has been bleeding ever since. The only reason they haven't augered in yet is that the price of borrowed money is so cheap. Once rates begin to rise, and make no mistake they will, Bain will liquidate the limited assets and write off the losses. With the competitive margins on gear, there is just no way for them to compete with already established online retailers MF and Sweetwater. It's not a matter of if, but when.

Randy

The bigger problem is that many, many businesses operate in this condition.
 
I too, believe that is it simply a matter of when, not if, the rates rise. This country can not keep the rates low by artificial means for much longer. They are already hinting that EQ is about to end or at the very least be curtailed. several hundred points were lost in the stock market just over the mere mention that the end to QE was being considered.  The hope was that the economy would pick up as a result of "cheap money" but that has not happened. Pumping money into the economy, inflating the existing dollars, is not a good idea and it certainly can not continue for long since it destroys the buying power and wealth of the country.
 
Factor in that it's not just here in the US, but more broadly, in many of the major financial players in the world, who are in a similar predicament and are also looking for the easiest, least painful way out..... while knowing that no matter which door they choose, there will be major, and painful financial repercussions.
 
When the situation finally does arrive, many companies will be forced to liquidate assets and it will be ugly.....
 
Just saw Portugal and Spain are soon to be back in the news and the US debt ceiling is coming on fast...again.... how much further can we kick the can? Even strong, well managed businesses will have difficulty remaining solvent in a global money crisis.

Guitarhacker
I came across this story.... the inner workings of GC
 
http://thetoneking.com/wp/the-debt-pyramid-how-guitar-center-paid-its-april-2013-obligation/
 
 

 
 
It is ironic that the writer of the article linked to in the OP presumes and suggests that he is qualified to be an editor for MMR yet he can't do a competent job of actually writing his very own article.
 
Here is a link to the Musical Merchandise Review interview that he cites yet never provides a footnote for:
 
http://mmrmagazine.com/82-current-issue/upfront-q-a/149-guitar-center-s-gene-joly-responds-to-employee-unionization-efforts.html
 
 
As a spectator, it seems to me that the thing that is hurting music retail at the moment is an absence of full service wholesale distributors who can finance and warehouse large enough buys to share an economy of scale for a network of independent retailers.
 
Guitar Center made their own distribution network.
 
It will be interesting to see how things evolve.
 
In the Bicycle business there are a few prominent wholesale distributors that are so well run that hundreds of retail outlets have been able to leverage the potential made possible by those distributors, to run lean and responsive retail counters that can get you anything you want, quickly and at a fair price.
 
My friends in the music store business don't seem to have the same sort of infrastructure to partner with. They depend on a hodge podge of small distributors and it seems difficult to efficiently provide a selection of the best of the most popular items.
 
Just babbling.
 
best regards,
mike
 
 
 

borrowing money to pay off debt; 
 
borrowing money to keep the machine running for another few days/months. I wonder how many other business are doing the same.
 
and what is really frightening, the Federal (privately owned) Reserve is doing likewise;
 
each month pumping billions (of invented money) into a stagnant economy in the hopes of keeping the wheels turning. The only thing more frightening than flooding the economy with invented money is to actually stop doing it.  
 
Scary times.

 
If you read the article you see that they often borrowing money from themselves.
 
They are double dipping for the vig.

If they use inventory that is "fronted" to them for collateral on a loan who gets the inventory if they default? I wonder if this is what happened to MARS. Also, I thought MF and GC were the same company.
Maybe this expains why I got a call from some GC salesman a couple of weeks ago, first time ever. Then again I got a call from Tim at SW last week too. I used to buy at GC regularly and I have a GC credit card but I really preferred MARS, they were always more laid back and the store itself was MUCH better. We now have a SAM ASH store down the road from GC and it seems, to me, to be more well stocked and I like the lay out better. We have a small local chain that is OK too, Ken Stanton, then in town we have one or two small stores that sell a few PV SS amps, lower end guitars and cater to the school music programs.
 
I have been able to get GC to match SW sale prices and eat the sales tax so I get "out the door" with the same price as I would buying online with free shipping. I know they can't be making the money they need once they pay a sales comission but that isn't my problem, yet. If the bigbox music stores fail we will all be paying more for what we want and need. Then again I don't think Sweetwater, B&H, or Florida Music are going anywhere and they all have great prices.
 
I hope they make it. Maybe they can get a "bailout". Then again probably not, they aren't a union shop.
 
J

There's too many getting a bailout when they shouldn't even qualify for bail.

Maybe they could get an out??  A billion here a billion there pretty soon you're talking about real money.
 
J

I feel sorry for their vendors.  I got hit for about $30,000 when Mars Music went belly up.  We never saw it coming.  I just happened to see it in Google News or something.  Luckily for me, when GC approached us about supplying them, their bully tactics put me off so I wouldn't sell to them.  Unfortunately, that meant the Musicians Friend account went bye bye.