Gui­tar Cen­ter plays up hands-on try­outs

Re­tailer’s re­cov­ery ef­forts in­clude an over­haul of stores to em­pha­size ex­pe­ri­ence.

Los Angeles Times - - BUSINESS - By Sa­man­tha Ma­sunaga

Justin Al­varado perched on a stool, softly strum­ming an elec­tric gui­tar and ig­nor­ing the teenager who jammed just feet away.

Al­varado, 19, comes to Gui­tar Cen­ter’s Sher­man Oaks store ev­ery few months to check out the bass gui­tars as he saves to buy one bet­ter than his cur­rent pawn-shop spe­cial.

“This is where it’s at,” Al­varado said. “I’m al­ways try­ing stuff out.”

Gui­tar Cen­ter is fa­mous for al­low­ing cus­tomers to end­lessly fid­dle with its prod­ucts, which th­ese days in­clude syn­the­siz­ers and strobe lights along­side the tra­di­tional gui­tars and

drums. The lure of such prod­uct demos is key to the West­lake Vil­lage re­tailer’s re­cov­ery ef­forts af­ter rough years marked by the re­ces­sion, on­line com­pe­ti­tion and the ex­plod­ing pop­u­lar­ity of hip-hop and elec­tronic dance mu­sic, more hiply called EDM, which aren’t known for gui­tar riffs.

New top man­age­ment is look­ing to lever­age Gui­tar Cen­ter’s 268 stores as its big­gest ad­van­tage over e-com­merce through an ex­ten­sive store over­haul to em­pha­size the hands-on ex­pe­ri­ence.

“There’s noth­ing more im­pact­ful than pick­ing up and play­ing in­stru­ments,” said Michael Amkreutz, ex­ec­u­tive vice pres­i­dent of mer­chan­dis­ing, mar­ket­ing and e-com­merce. “There’s not as much emo­tion in­volved in other in­dus­tries.”

The re­mod­eled stores are more open and of­fer more les­son ar­eas as well as as­sis­tance in set­ting up in­stru­ments and equip­ment, Amkreutz said. Some may in­cor­po­rate mu­sic con­sult­ing.

In the past, th­ese kinds of ser­vices were farmed out to busi­nesses that popped up near Gui­tar Cen­ter lo­ca­tions, said Frank Alkyer, pub­lisher of Mu­sic Inc. By in­clud­ing th­ese in-house, the com­pany is mak­ing its stores all-en­com­pass­ing so that some­one who is there for lessons might pick up other prod­ucts, such as strings.

“There are a lot of peo­ple that … think brick and mor­tar is dead,” he said. “I don’t think it is any more than peo­ple who say any­thing else is dead. It’s not one or the other, it’s all.”

True to its name, Gui­tar Cen­ter still sells more gui­tars that any­thing else, about 41% or 42% of over­all sales, Amkreutz said. In sec­ond place, with 27% or 28% of sales, is what the com­pany calls tech­nol­ogy — record­ing equip­ment, key­boards, mi­cro­phones and fog ma­chines.

The store in Sher­man Oaks, which was re­mod­eled re­cently, ref lects this shift. The main room’s walls still dis­play tow­er­ing rows of elec­tric gui­tars, but the ad­join­ing room is stocked with laser lights and DJ equip­ment.

Since its hum­ble be­gin­nings as an or­gan store in Hol­ly­wood in 1959, Gui­tar Cen­ter has grown into the world’s largest mu­si­cal in­stru­ment re­tailer.

Crowds of mu­sic fans have f locked to the f lag­ship Sun­set Boule­vard store and its “Rock Walk” to see fa­mous mu­si­cians’ hand­prints in con­crete. The pri­vate com­pany said it holds an es­ti­mated one-third of the $6-bil­lion mu­si­cal in­stru­ment mar­ket.

In 1997, the 28-store chain went public and moved na­tion­wide. Pro­fes­sional mu­si­cians were drawn to the re­tailer’s well-stocked shelves and large lo­ca­tions.

“The way they de­scribed it was a wow ef­fect,” said Brian Ma­jeski, edi­tor of the Mu­sic Trades mag­a­zine, an in­dus­try pub­li­ca­tion.

In 2007, Bos­ton-based pri­vate eq­uity firm Bain Cap­i­tal Part­ners bought Gui­tar Cen­ter for $2.1 bil­lion. The chain op­er­ated more than 210 stores at the time, as well as more than 95 Mu­sic & Arts stores, which sold and rented band in­stru­ments. The re­tailer also owned Mu­si­cian’s Friend, which sold in­stru­ments both on­line and through a cat­a­log.

But af­ter al­most a decade of steady growth, the mu­sic in­dus­try stalled in 2008, when the re­ces­sion hit, and the in­dus­try never quite re­cov­ered, Ma­jeski said.

Los An­ge­les fi­nan­cial firm Ares Man­age­ment took con­trol of Gui­tar Cen­ter in 2014 af­ter agree­ing to swap about $500 mil­lion in com­pany debt for eq­uity. Dar­rell Webb, for­mer chief ex­ec­u­tive of the Sports Author­ity Inc. and Jo-Ann Fab­ric & Craft Stores, is now at the helm of Gui­tar Cen­ter.

“We’ve been very fo­cused on ... mak­ing sure we main­tain the core cul­ture at Gui­tar Cen­ter,” he said. “We want to be as wel­com­ing to the sub­ur­ban mom as we are to the more tra­di­tional rock cus­tomer, or an EDM DJ.”

For the first quar­ter of 2015, earn­ings in­creased 40% af­ter some re­struc­tur­ing charges, Webb said. As a pri­vate com­pany, Gui­tar Cen­ter doesn’t dis­close fi­nan­cial fig­ures.

Credit rat­ing com­pa­nies like Moody’s In­vestors Ser­vice are cau­tious. In April, Moody’s gave the com­pany a sub­prime B3 rat­ing, but said the out­look was sta­ble.

“The econ­omy hasn’t im­proved nec­es­sar­ily for prod­ucts that are highly dis­cre­tionary,” said Keith Fo­ley, se­nior vice pres­i­dent of Moody’s.

The com­pany restruc­tured in Novem­ber to lower debt but is still highly lever­aged, he said.

“They’re in bet­ter shape,” Fo­ley said. “The first quar­ter was ac­tu­ally pretty good. But that be­ing said, there’s a big hur­dle for them to re­ally get on some strong fi­nan­cial foot­ing.”

To that end, Gui­tar Cen­ter also has beefed up its web­site and is fea­tur­ing more women in its com­mer­cials as part of an ef­fort to ap­peal to all buy­ers at all ex­pe­ri­ence lev­els. In ad­di­tion, the re­tailer is heav­ily pro­mot­ing its DirecTV se­ries of mu­si­cian in­ter­views and live per­for­mances called “Gui­tar Cen­ter Ses­sions.”

“It’s a much more chal­leng­ing mar­ket­ing puz­zle to­day than ever be­fore,” said Alkyer of Mu­sic Inc. “Those who can find the ways to cut through the clut­ter are the ones that are go­ing to win.”

Mariah Tauger For The Times

CUS­TOMERS AR­RIVE for the grand open­ing in April of Gui­tar Cen­ter’s West­lake Vil­lage lo­ca­tion, the 268th store in the in­stru­ment re­tailer’s chain.

Pho­tog raphs by Mariah Tauger For The Times

JACK WOODS, left, and Nate Aldin have a lit­tle jam ses­sion dur­ing the grand open­ing of Gui­tar Cen­ter’s West­lake Vil­lage store. The re­tailer is fa­mous for al­low­ing cus­tomers to end­lessly fid­dle with its prod­ucts.

“THERE’S NOTH­ING more im­pact­ful than pick­ing up and play­ing in­stru­ments,” Gui­tar Cen­ter Ex­ec­u­tive Vice Pres­i­dent Michael Amkreutz says.

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