The news over the past several years has not been good for Guitar Center, Inc. (GCI), the music retail giant that’s still straining under more than $1 billion in debt, the legacy of an ill-timed leveraged buyout in 2007. But now, with that debt refinanced and no loan payments due until 2021, the 59-year-old retailer is attempting to spend its way out of its financial hole, adding over 30 new Guitar Center locations in the past four years and refurbishing many of its old stores.
“We feel we’re in a really strong position to continue to spend aggressively and grow the company,” says CEO Ron Japinga, who claims GCI has seen consecutive growth over four quarters and $2.2 billion in total sales revenue last year across all subsidiaries. That includes e-commerce site Musicians Friend and Music & Arts, the nation’s largest retailer of instruments and supplies for student musicians. (Because GCI is privately held, sales figures could not be independently confirmed.)
Last week, Guitar Center unveiled its most ambitious refurbishment project yet: a $5 million overhaul of its flagship Hollywood store. After a week of special events, workshops and clinics, the store presented a free block party on Saturday, Nov. 3, hosted by Beats 1 radio personality Zane Lowe and featuring performances by DJ A-Trak and Anderson .Paak. The message behind the remodel and the block party, which closed down a section of Sunset Boulevard, was perhaps best summed up GCI’s chief marketing and communications officer, Jeannine Davis D’Addario: “The demise of Guitar Center has been greatly exaggerated.”
Inside the Hollywood store on Saturday, customers swarmed over several new displays, including a 15-foot “pedal wall” with over 150 working guitar pedals; an expanded acoustic section with a quiet room dedicated to Taylor Guitars; 11 playable electronic drum kits; and a vintage room with roughly $4 million in merchandise, according to Guitar Center’s director of used and vintage, Jack Hetherington. The store has also increased its museum-like displays of guitar memorabilia, adding Eric Clapton’s iconic “Blackie” Stratocaster and cherry-red Gibson ES-335 to a collection of over 100 items that already included Eddie Van Halen’s “Frankenstrat,” B.B. King’s “Lucille” and acoustics once owned by Paul McCartney and Johnny Cash.
With floor to ceiling displays of guitars by Fender, Gibson, Martin and other top brands, the refurbished store is not short on the wow factor. But according to executive vp sales Michael Amkreutz, the main directive Japinga gave his team during the two-year remodel was, “Make sure everything is interactive, that customers can touch, play and feel anything in the store.” To this end, bright red “Play Me” signs adorn everything from hand drums to keyboards to DJ controllers.
“Doing that in a way where the store is still shoppable, that you have certain security elements built in, was quite a challenge,” says Amkreutz, standing in the building’s widened entrance, which now affords customers a view all the way through the store to the vintage room in the back. “Now we have transformed this store into 30,000-plus square feet of retail, immersive, musical instruments experience. We don’t have anything [else] like this in our chain today.”
A less flashy but crucial component in the makeover is tucked away on the second floor, where a set of expanded and remodeled practice studios will host lessons in guitar, drums, voice, recording software and more. Earlier this year, Guitar Center hired veteran drummer and educator Donny Gruendler, former dean of the Musicians Institute, in the new role of vp music education, to oversee the expansion of the company’s educational offerings. Since joining GCI in January, Gruendler has added 90 lesson locations to the chain; 274 of Guitar Center’s 290 stores now offer some form of instruction to students of all levels.
“By the end of the year, we will have completed nearly 1 million half-hour lessons,” says Gruendler, sitting in one of the Hollywood store’s multi-use practice rooms. Outside, his former student .Paak is performing a very loud soundcheck, but the room’s new acoustic panels muffle most of the sound. Gruendler is especially excited about Guitar Center’s presence in communities where music education in public schools has been slashed, citing his own former hometown of Detroit as an example. “We’re reaching a lot of young people that wouldn’t normally have access to music education,” he says.
D’Addario echoes the point. “At our core, our mission is putting more music in the world,” she says. “And that means putting more music makers in the world.”
That may sound like a noble goal, but it’s also one that’s essential for Guitar Center’s financial future. In a refinancing strategy announced in April, GCI extended the due dates on its $1.3 billion in debt to 2021 and beyond — a move that prompted slight upgrades to its credit ratings with Moody’s and S&P Global. (Though Moody’s still cautioned, “The ratings outlook remains negative.”) To pay down those debts, Guitar Center will need to find new customers to continue Japinga’s strategy of aggressive expansion, which flies in the face of the so-called “retail apocalypse” that has recently claimed such high-profile victims as Sears and Toys R Us. By expanding its educational offerings, Guitar Center is banking on those new customers walking into its stores in the form of beginner-level students.
Japinga and D’Addario acknowledge that Guitar Center has gotten “lumped into” stories about the retail apocalypse because of its well-publicized debt issues, as well as troubling signs specific to the music sector, like Gibson’s Chapter 11 bankruptcy filing earlier this year. But they dispute any notion that those debts have had a negative impact on the company’s day-to-day operations. “Overall we’re in very good financial health,” says D’Addario. “We’ve never closed a store for performance issues. We feel like we’re making great progress on our initiatives.”
Industry-wide, there are encouraging signs for music retail. Sales of fretted instruments rose 8.9 percent in 2017, according to Music Trades, and unit sales in the guitar market are now at their highest level since 2008. “We’re selling more guitars than we’ve ever sold,” D’Addario says.
As the sun sets over Sunset Boulevard, fans gather in front of the stage outside to watch three new honorees get inducted into the Guitar Center RockWalk, the display of handprints embedded in the pavement of the store’s entryway. Percussionist Sheila E. and Drum Workshop co-founders Don Lombardi and John Good press their palms into cement plaques, adding their hands to those of such music legends as Les Paul, Stevie Wonder, Brian Wilson and members of Queen and Lynyrd Skynyrd. During the ceremony, Good notes that he met his wife at Guitar Center when she worked there, a reminder of how many musicians’ lives the historic Hollywood store has touched over the years. “The place, Guitar Center, is an incredible part of my life,” he says.
Later, in an hour-long performance during which he debuts several new songs from his forthcoming album, Oxnard, .Paak tells his own, cheekier Guitar Center story, admitting that he and his bandmates used to go there just to practice on the display instruments because they were too broke to afford anything in the store. “I appreciate it, Guitar Center,” he says of the company’s support during his lean years, as well as this free block party. “Good looking out.”
.Paak, a triple threat rapper, singer and drummer who plays a mix of hip-hop, rock and R&B with a live band, the Free Nationals, represents the kind of musician to which Guitar Center hopes to appeal — not just the classic rock lovers picking out Led Zeppelin riffs in the guitar showroom (though on Saturday, there’s no shortage of them), but a younger, more diverse demographic who are more inclined to blend genres and skill sets, plucking their gear from every corner of the store. “A trend that we’re seeing [in] electronically-created digital music is this return to bringing [live] instruments into the overall mix,” says D’Addario. “We’re seeing that happen across the industry, which bodes well for our business.”
“When everyone was talking about the retail apocalypse, we hunkered down and we made sure we came out of that time period a better retailer,” Japinga adds. “And we’re starting to reap the benefits.”