Wednesday, April 25, 2018

Retail: Guitar Center "Hanging by A String"

Music retailer Guitar Center is the latest national chain to be sinigng the blues.

The S&P recently reduced the retailer's corporate credit rating further into junk status. S&P does not see the retailer — with more than 250 stores across the U.S. — improving its credit metrics given high leverage and weak cash flow, especially as more than $600M in notes mature in April of next year, according to MarketWatch. 

Guitar Center remains in operation, just on a watch list with a host of other retailers in precarious positions. That means the retailer is susceptible to any shocks, including a recession or a sharper drop in guitar sales, Digital Music News reports. 

Lower guitar sales are also the source of guitar-maker Gibson's tribulations. Gibson is saddled with more than $500M in debt coming due this summer. “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 [Electronic Dance Music], rap, and less guitar-driven indie music — even though interest in music itself has never been higher,” Digital Music News reports. 

The company has not announced any store closures; it recently announced a new store in Delray Beach, Florida, and a revamped store in Bloomington, Minnesota

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