I was interested in America’s largest music retail chain, Guitar Center. I wanted to know if I can buy stock in the company and if this is a worthwhile investment. It is interesting to consider now when thinking about stock, the impact the COVID-19 pandemic has had on a company.
Let’s get started on taking a deeper look into the company.
Can I Buy Guitar Center Stock?
Guitar Center is an American music retailer chain and is a publicly-traded company as of 1997 which means that you could have bought stock in it. Guitar Center’s Stock Ticker Symbol was GTRC and the market in which it could be found on in NASDAQ. Interestingly, Guitar Center is the first publicly traded company in the music retail industry. However, as of 2020, Guitar Center had to announce bankruptcy. They have done this to “significantly reduce debt” and also to improve their ability to reinvest in the business.
It has felt the impact of the COVID-19 pandemic and people looking to E-commerce as they cannot visit the physical shops. Therefore, sales have taken a massive decrease, leaving the company in a difficult financial position.
What is Guitar Center?
It is an American music retailer chain. The company sells guitars, amplifiers, percussion instruments, keyboards and professional audio and recording equipment. In terms of this industry, it is the largest company in the US. It has 269 locations with a headquarters in California. It was founded in 1959 where it was actually The Organ Center until it moved into selling a diverse range of musical instruments. It took advantage of the new wave of pop in the 70s and 80s to expand its sales and growth of musical products.
Is Guitar Center a publicly-traded company?
In 1997, Guitar Center became a publicly-traded company, making it the first publicly traded company in the music retail industry. A publicly-traded company is one whose ownership is organised via stock shares, and they are freely traded on a stock exchange or market. It is usually to raise money to fund the company. A private company does not have shares that are available to the public to invest in. However, this did not come without difficulty. The stock offering was based on the fact that the company would be assumed to expand quickly. However, Guitar Center’s way of doing things was to open one store at a time, closely monitor the developments, and then go on to open another. However, they now had to move at a faster pace. The first year as a publicly-traded company was successful as by 1998, the sales had increased 39%, and the net income increased 60% to $11 million.
Has Guitar Center experienced any difficulties?
Moving into the 21st century, Guitar Center continued to grow and expand, which was of much joy to investors. However, a private equity takeover had left Guitar Center struggling against a debt load. When the COVID-19 pandemic hit, it “wiped out” much of the sales growth progress, as CFO Tim Martin stated. For example, in the first half of the year 2020, total sales fell by nearly 20% compared to 2019. The company entered bankruptcy court with a plan to restructure.
One positive for the company, in the pandemic, was the time spent at home either in lockdown or quarantining. This is because, in order to distract themselves, people bought instruments and wanted to learn a new skill. However, this interest would need to continue in order for sales to rise as they continue to operate, despite declaring bankruptcy in 2020.
According to the New York Times, the company stands at $1.3billion in debt. Due to the majority of their sales being in storefront situations, the pandemic affected this greatly with the closure. However, Guitar Center does have a plan in place as they state that they have secured $165 million in new equity investments, and they plan to reduce debt by $800 million.
Where do I start in terms of buying stock in Guitar Center?
Despite Guitar Center previously being listed on the ‘NASDAQ’ market under the ticker symbol ‘GDRC’. There is currently no information about stocks in the company or how to buy.
Are there similar companies I can buy stock in?
The five main music industry companies are Vivendi, Sony Corp, Live Nation, Spotify and Tencent Music Entertainment. However, according to Music Business Worldwide, the COVID-19 pandemic wiped nearly $5 billion off of the total value of Video, Spotify and Live Nation combined. Clearly, the pandemic is having a large negative impact on the music industry globally.
What could Guitar Center do to improve their business?
The difficulty is that the COVID-19 pandemic is very unpredictable, and therefore it makes it difficult for Guitar Center to create and stick to a solid business plan. However, with the forced closure of most shops except for essential places, one way that Guitar Center could improve sales would be to improve their online presence. They could increase this so that customers can order their products and have them delivered to their homes. However, a change in business direction obviously has it’s financial strain and Guitar Center does not appear to have the amenities to fund this at the moment. Failing this, they could utilise another website that “does the work for them” by selling their products and utilising their delivery service. This does too require a lot of money which may prove difficult to Guitar Center in their current state. Perhaps a good option would be looking into selling some assets such as some shop space in order to raise some money for the business, as the physical shops are not in use at the moment anyway.
Should similar companies be worried about their outcome during the Covid-19 pandemic?
Like all businesses, the pandemic has caused some effects, whether it’s positive or negative. I would say that businesses that are most prominent in physical aspects such as shops and are weaker on their online presence would suffer the most. This is because there are many lockdowns worldwide that close all shops except for essential ones. This halts sales and therefore, a decline in the business financial aspects. Therefore, similar businesses in that sense should be worried about the impact of the Covid-19 pandemic and are probably already experiencing some consequences.
Let’s summarise what we have found in this article.
Guitar Center is a publicly-traded company which would mean that you could buy stock in it. However, it declared bankruptcy in 2020 in order to restructure so that they can get out of their debt and have the ability to reinvest in the company. Therefore there is currently no information on buying stock, nor would you want to in their current financial situation.
We hope that this article has answered your questions and that you feel more informed now. Let’s keep an eye on Guitar Center and see how the pandemic continues to affect the company, and if they can settle their debt.