Guitar Center Corporate Is Apparently A Madhouse Right Now

Last week, we published a series of internal emails detailing layoffs at Guitar Center’s corporate offices, and now we are starting to hear that things are pretty crazy at GC HQ – more jobs are getting cut, people are under intense pressure to perform at all levels, and GC’s new CEO is attempting to maintain calm while the company’s stock continues to tank.


Sources initially told us that around 40 people lost their jobsbut in the second wave of firings, that number is now closer to 180. Following those reports, Eric Garland, a financial analyst and managing director of Competitive Futures who has been following the Guitar Center story for quite a while, published his forecast for the company, “The End of Guitar Center,” in which he wrote about how in addition to these firings, if you take a look at the company’s books and outstanding debt it looks as if they’re in a precarious position. That forecast was picked up by ZeroHedge and Naked Capitalism — the MetalSucks and Metal Injection of independent financial analysis — and began to circulate around Guitar Center.

The financial mumbo-jumbo that’s been going on with Guitar Center over the last few years can sometimes sound basically like what it actually sounds like inside a Guitar Center, but the story at this point is pretty simple. There are really only two things you need to know: last year, the company was basically acquired by its majority bondholder, Ares Capital Management, and as of three months ago, the Ares-helmed Guitar Center put a new man in the CEO chair, Darrell Webb, whose resume includes stints at JoAnn Fabrics and The Sports Authority (but who has little experience in the music business).

So, Guitar Center is barely a year under its new ownership, and less than two months under new corporate management, and reports from sources inside the company say that chaos is starting to break loose. The firings, which took place in two phases, included some people at the senior level, vice presidents and other assorted veterans. One former employee who was part of this most recent round of layoffs and who spoke to Gear Gods on the condition of anonymity tells us that Guitar Center is now a “company run by non-music people,” and that after the firings, our subsequent coverage, and Garland’s grim predictions, it’s a madhouse at their corporate HQ in Westlake.

According to sources, “no one’s job is safe,” not even some of the most senior people at the company. The first major firing of these was Gene Joly, the former president of Musicians Friend and well-respected music industry professional, who was let go two days before Christmas. Others include heads of several divisions in the company, including the vice president of GC Pro, Guitar Center’s Gear/Advice/servicing branch. The thing is, guys like Joly are among the top individual account earners for Guitar Center, so these firings would appear to be less about making money than plugging every single cash-hole in Guitar Center’s ship. Meanwhile, the company is reeling from Fender’s announcement that they are about to start selling their products directly to consumers, and from souring relationships with some of their top vendors, like Behringer. So they can’t make money, they’re losing some top-tier products, and they can’t afford to pay the people who make the company money. Oof. Which is a far cry from what used to be, according to one former employee, a place where you’d come to work at 7AM and Van Halen would be blasting. In other words, this is a crisis-mode company that is being restructured, top to bottom.

Which, as Eric Garland pointed out in his analysis, makes perfect sense. Ares Management is a massive financial services firm whose primary concern in this instance is protecting themselves against losses from Guitar Center, their unsustainable music retail investment. And in Webb, a guy who has no background whatsoever in the music industry — and who, sources say, couldn’t tell a Marshall from a corporal — they’ve chosen a proven financial services veteran who can turn Guitar Center into a manageable, profitable little music shop. So the world’s biggest music retailer, on top of all the problems its had over the years, is cleaning house on the few remaining people who actually care about music, in order to keep this runaway business from going off the rails.

At least, Ares hopes, it can keep Guitar Center from tanking. Garland sees the scenario differently:

There has not been a single public comment from an Ares employee since 2014 about the future vision for Guitar Center and I suspect that one does not exist. Go look through Ares’ quarterly reports and press releases and search for the word “guitar.” Perhaps that will provide a perspective on the relative importance of this transaction to a company with a much larger financial play in the works.

This is pure speculation, but given the size of their investment I imagine they see Guitar Center as a deal they made back in the mid-2000s before the crisis, one that Bain screwed up. They probably took the equity as the best way to perhaps get something instead of pennies on the dollar. These days, they’re more busy reopening factories in Europe along with national partners. They have better things to worry about than this sad scene, but this is a conclusion that will be very uncomfortable for members of the musical instrument industry who will not want to feel quite so unimportant.

Further, after we broke the news that the company had laid off senior staff, and then following Garland’s dire predictions for the company’s future, Darrell Webb forwarded another email to all of Guitar Center’s corporate employees in which he basically said that the press is blowing the company’s troubles out of proportion, that the company will “continue to seek efficiencies” and that they are on track to meet their quarterly goals in 2015. But what do the numbers say?

trading activity


Guitar Center’s secured bonds have been tanking since last July, and are taking a pretty consistent hit each day, according to data from the Financial Industry Regulation Authority. Just yesterday investors pulled $11 million out of the company, the kind of hit that is highly abnormal in this sort of bond market. It’s too early to call this a “run” on GC’s bonds, but it sure looks like a heck of a lot of people are starting to jump ship. And of course, once word starts to go around that the company’s not looking so hot, and that it’s a mess at the highest rungs of power, and then one investor pulls out… well, then another one pulls out, and then another, and another, and another, and another.

According to an earnings call from December 2014, Guitar Center was down to $34 million in total holdings, with just $10 million of that number in cash. That same month, Forbes reported the company is on a Distressed Debt and restructuring watchlist, noting that the company has a bond payment, which some analysts estimate at nearly triple what Guitar Center has in cash, due in April 2015. Garland’s got a take on what happens when GC reports back to its bondholders in three weeks that well, shit, they might need a couple million I-O-U’s:

The fact is, the die is cast. In a couple of weeks, Guitar Center will need to report its Christmas performance to its bondholders. If things do not look good, its bonds will be ripped apart like Radio Shack’s. Moreover, if I had to guess, the $10 million in Guitar Center’s coffers will not be enough to make the payment to their bondholders due in April 2015. In advance of that, they will need to seek protection under Chapter 11 of the bankruptcy code. Maybe they have another ultra-complex trick to bring out of the private equity playbook, but this whole thing is a waste of time.

Their CEO, who is in a mad rush to cut costs and trim unnecessary staff members to keep his company from being run into the ground, is trying to maintain some level of calm among the remaining members of his ranks. But the sense that’s leaking through the cracks of emails and testimonies of current and former employees and industry analysts is that everyone knows it’s the end. Ares hired Webb because of his experience with reviving failing companies. The question at this point, given how desperate some of Webb’s teams’ restructuring efforts are, is whether their efforts are too little, too late.

So we’ll see what happens come bond-payments time in April. The madhouse that used to be Radio Shack, by the way, is as of last week a carcass being chipped away at by Amazon and Sprint.

Written by

Max is managing editor of Gear Gods.

Latest comments
  • Let that bloated crap of a company die, gut it, send the corpse off for rendering. You deserve what you got GC!!!!!! Glad to see you go. The capable will always find a place.

  • When I bought my guitars I bought them from a mom-n-pop who loves music and it shows. I made payments on my Martin and when I handed over the last payment they led me to the room where my guitar was still in the cardboard and plastic. That was an amazing day for me.

    After GC opened I visited there a few times, even bought a few pedals, misc small package gear. But, it became obvious at some point several years ago that this thing was going off a cliff. The corporate culture didn’t understand hard core enthusiast and became offensive to those folks. Fairly soon after our local store opened it became clear that this business was about drawing in a line of people who wanted to learn music. Not that that’s a bad thing but, it’s unsustainable. Going to GC began to feel like getting a root canal.

    I think it started out pretty good and somewhere along the way became a, soulless, perverted music store. It may be able to be saved but, not by bean counters. Find someone who loves making music and understands business. CG inspires no long term customer loyalty.

    I haven’t darkened the door of CG in several years. I hope they don’t go under but, the bloody place is empty. The mom-n-pop is still full. The Walmart model works for cheap clothes, coffee makers and groceries. Music is a life long love affair.

    • I agree… Their model could only be sustained for so long. That model does work, but not in this industry. Soon GC will be a thing of the past and ma and pop store will continue to survive…. Keep your money in your town and help your local economy…. Love independent locally owned stores… Bye bye GC….

    • I was told by a hiring manager that they don’t make much money off the low market instruments anyway, but that their profits came mostly from accessories. New employees there didn’t want to work in guitars, they wanted to work in accessories where their commission was far better. But you have to sell a hellofalot of tab books, straps, and cables to pay for that kind of overhead.

  • If GC goes down it will take large parts of the music products business with it. Many of the brands people enjoy from drums to recording to guitars, would be in deep trouble or bankrupt themselves if GC failed. It would take decades to build back their capacity through mom and pop stores. I believe Ares will put more money into it, since they just took it over recently. On the other hand, if they ever reach a point where they can make more money by taking it bankrupt, then it will go. As for the rest of the comments I’ve found GC to be a pretty decent shopping experience the last few years.

  • What’s not being said in this article is what’s killing big box stores of all stripes – the internet. Personally, the service at my local GC has been horrible for years, staffed with 20-somethings who know more about piercings and dreadlocks than guitars. What I bemoan is the loss of the mom and pop “string shop”. Perhaps with the big boxes gone, they can make a comeback. Eventually, brand won’t be enough to satisfy all needs, when people realize that Gibson and Fender and even Martin don’t make consistently great guitars, and that you actually have to play them in person to know the good ones. Try that on All I can say is that for the smaller brands who rely on the big boxes to give them exposure, they ought to start creating a web presence.

    • Musician’s Friend is owned wholly by GC, as are Music123, Music & Arts, and Woodwind & Brasswind. Maybe you knew that already, but it was unclear. Also, Westin Presidio, who are a minority shareholder in GC, also own a big chunk of Fender.

  • I have made some major purchases at GC over the years ($1000+) and was treated like I was there for a free giveaway item. I routinely waited more than 20 minutes to get a salesperson, even when the store was nearly empty. This was in the Pro Audio department. I got faster, better service at the accessories counter when the store was packed. If GC is looking for someone to blame, start with your Pro Audio people. Elitist snobs.

    • Who the hell puts a professional audio service in the middle of consumer retail space? Was the door greeter also reflowing cold solder joints on an amp? *Laugh out loud*

  • I’m glad I live in Houston, where we have a variety of Mom & Pops to take care of musicians and aspiring musicians. GC won’t be missed. I do wonder what will become of all the vintage guitars they’ve sucked up out of the market, though.

  • I agree GC sucks to shop at, this coming from someone who drops close to 10k a year there- but do we remember the mom and pop music stores? Their limited inventory (5 cymbals on the wall, a sm57 or 58?), their painfully high prices? I for one will miss GC if she goes under, buying instruments off the Internet is impossible for me, no way to take it for a test run. OR maybe I could buy 10 guitars and send 9 back.. But that’s a butt load of shipping…

    • You’re comparing something from 30 years ago…with now. Remember music malls 30 years ago? They sucked, too. Guitar Center is a music mall with lipstick, piercings and tattoos.

      Walk into a real music store today and prepare to be enlightened. Want a deal on used stuff? They can match a GC price, but they tend to not take garbage on trade-ins. You might pay more…because you’re not buying a piece of junk. Looking to buy new? They charge full MSRP just like GC, but the guitar is polished, set-up, tuned and tested. Try to find a factory mistake like those commonly-spotted ones at a NAMM show or on The Wall at GC. Good luck!

      Buying from GC is *just like* buying from the Internet. Are you kidding? The typical GC sounds like someone dumped a shipment of paint can lids into an orchestra pit. Youtube videos are probably better. Their slogan should be: “Guitar Center: Turning Hard Earned Wages Into Buyer’s Remorse For 51 Years!”

  • How dare the new management of GC get rid of the highly-compensated “music people” who have been running the company into the ground! Obviously, it’s a huge mistake to replace them with those awful “non-music people” who understand how to cut unnecessary costs, trim top-heavy management and incompetent staff, and recover value from a distressed company.

    • Um…I think…have you read the article? The company’s owners turned it over to two capital firms in order to expand its market share. This put the company into a debt hell from which it will never escape.

      While I don’t disagree that GC spends unnecessarily and is (was?) top-heavy, it’s generally not good practice to fire people that are responsible for the activities that generate revenue. It’s sort of like eating a cheeseburger because you’re starving to death, but then clenching your throat with your hands to stop yourself from swallowing a meal that might raise your cholesterol.

      I also am unable to cognitively rectify the practices of not training staff while simultaneously accusing them of incompetence.

  • I still go to the GC at the Dayton Mall in Miamisburg, OH. I will be sad if GC goes under as well. It is my favorite store.

  • Anyone who researched would know that Guitar Center took all their top employees and moved them to Fender before all this went down. Hmmm, looks like they’ve been in bed together for a while. But then again, it was Bain Capital. (just look at what’s happening with Burger King) And I’m not just saying this because Guitar Center took my idea for a pedal, gave it to Gibraltar (Fender) who made one that sucked, then sold it at GC? I guess our money’s just being moved around again. Oh, and if you need vintage guitars, I think the Burst Brothers could probably help you with that. And please, BOYCOTT MUSICIANS FRIEND!!!

    • And from Fender now to DW. Keep an eye on that line.

    • What did you invent? Prove it was your idea and sue.. oh you can’t, because it wasn’t. I invented a magic potato once, give me a break.

  • If GC dies, which company will accept my String Club card?

  • Working in the percussion department of GC is a level of hell in Dante’s Inferno.

  • Guitar Center’s expansion was one of the worst things to happen to my geographical area as far as music retail is concerned. I will not be sad to see them go. in the music business, I’ve been a salesperson, GSM, GM, store owner, product rep, and pretty much everything in the industry outside of owning my own manufacturing company. I have competed directly with guitar center, and while my business model changed, I have been more successful with a guitar center 5 miles down the road than before they came because so many people come to home disgusted by the lack of knowledge and service they’re happy just to see a friendly face who knows what they’re doing.

    Walking into a GC as an educated musician and someone who understands the technology of music thoroughly is thoroughly depressing, and should be an embarrassment to their corporate ownership. I have had clients who formerly spent 50-60k per year regularly at GC and the GC “pro” rep acted like taking their orders (for 20-30k in equipment at a clip) was too much trouble, and would take weeks to even answer calls/emails (which promptly me to add more lines to my own business to service those who were being treated so poorly by GCS). I had the privilege of being on the other end of the speakerphone when a client called corpoate to complain about how he was treated. The disinterest was unbelievable from the supposed “head of customer service at headquarters.” wish I’d’ve had a tape (but that’ve been illegal in my state, so no tape..,)

    my biggest fear is the disruption to the business their demise will cause. huge amounts owed to manufacturers who can’t continue to operate without being paid by GC, and their being caught in BK and these comoanies waiting for pennies on the dollar will take the smaller (and, unfortunately, many of the better ones, out). I couldn’t care less about Fender – let them sell their stuff in Walmart to people who only care about the price on the sign and don’t want an experienced salesperson (the kind you had a chance of finding at that mom and pop store that paid their people a decent wage, cared about the customer, and would go out of their way to help if they could.) the big corporate actors haven’t yet realized that the music retail business doesn’t thrive fully under standard big box models. MARS, back in the early 2000s, was far worse – the OfficeDepot of music stores – and it turned any pro right off. GC, for a while, when they were still operating in a trickle down fashion from the original CA location, could be a decent if you got to the right location, but the later in the day it got, the worse it became. just try ordering a top of the line boutique synth form there today – if it isn’t at musicians friend/, don’t bothe or because they won’t know what you’re talking about. that’s been my advantage.

    I’ll be glad to see them go and watch the mess on the sidelines. at least in my area, anyone decent who worked there is long gone, so I don’t concern myself with any unfortunate who lose their gig, as most have done so much harm to musicians in my community with they lack of knowledge and trusted position that it’s best they’re as far away from people who need true assistance in he music realm as possible.


  • I was a Guitar Center employee for 17 years and was fired last week for “poor performance .” You would think that they would have figured that out 16 years ago ! I never thought about working any where else until they cut my hours from 40 hours /week to 23 hours /week. My paycheck went from $1700723/week to NO more than $325/week. EVERYONE’S hours were cut. ..ASK ANY GUITAR CENTER EMPLOYEE IN ANY STORE!

    Douglas Allen

    • Sounds about right, working for a company that Darrel worked for, they did it to me too. The unrealistic constant profits don’t happen, so cut hours for your employees to piss off the few loyal customers we have, and those who are desperate enough for the merchandise the store sells to put up with the crap that trickles down from above. Basically, it’s all about money now and how to extract more of it from the customer. When companies are in the billions, they’ve hit the greed threshold and it’s never enough.

  • I live and work in a town of approx 100,000. We have 4 GC’s within 50 miles. I’m now buying from a music store that is THRIVING because of those GC’s horrible service and quality. They are beating GC prices and gain approx 50 new customers a month who will never go back to GC. Now Fender is pulling all their stock out of GC and selling it as “B stock” to other Fender dealers. Let GC implode. They have always treated their customers like shit. Karma can be deadly.

  • I’d like to offer information, however I’m technically becoming a competitor, and it’s advantageous for me that GC continues to maintain a smouldering balance between its circus-like retail atmosphere (Close all shops in the mall! Cancel the three ring circus!) and investor pillaging. Bad customer service like only a brainless mega-corp can serve up, all while being crippled by investors who are taking measures to cripple their own investment because they’re unhappy at the returns on their crippled investment due to the fact that they’re crippling it. I’m sure there’s a Zippy the Pinhead cartoon somewhere that makes reference to this practice.

    I know what makes customers open their wallets, but I think I’ll just keep it to myself. Carry on GC! I’m sure analysts read lots of trade journals for information, but the one-eyed king only sees so much, you know?

    Aaaaanyway…not sure if I agree with everything I’m reading here. Let’s review what really happened:

    1. Bain took on GC for a second aggressive expansion of its retail locations

    2. The expansion was successful–grabbing more than 20% of the market

    3. The housing crisis–wait…loan fraud scandal happened

    4. People rightly believed investors and big business would react irrationally and briefly held onto their money

    5. Yup, as soon as businesses saw a brief slump in sales, they ran the 1980s playbook: (a) strike forehead with hammer; (b) yell “Derp!”; (c) conduct massive layoffs.

    6. After the business sector intentionally blew out its own brains with the layoff shotgun (both barrels, mind you–Ba-Boom! Brains all over China’s wall)–and with up to 25% of the population now unemployed and having no discretionary income–the sales slump became a reaaaaaally deep and reeeeeeally wide depression (I’m holding my hands far apart here)

    7. The performance entertainment industry (note: dependent on discretionary income and free time of customers) took a hit and traditional music performance withered; lots of professional musicians/techs/SEs/studios/venues hung up hats and boarded up windows.

    8. Manufacturers were experiencing declining sales in traditional “professional” grade equipment prior, but it accelerated; many dropped old product lines in favor of price-point Asian-made products that younger, less knowledgeable buyers could afford

    9. And here is Guitar Center….selling traditional guitars, amplifiers, PA systems, mixing desks, mics and accessories to a demographic that no longer needs those things.

  • Please stop! Yes, you all hate guitar center. So much so, everyone has been doing their best to “will” it to fail for five, ten years now. Guitar center could have been much better, and it’s sad the way the owners have treated it. But guitar center, in some form or another, is going to survive longer than every readers’ music career, no question. Printing these articles every 3 months isn’t going to change that. That’s a (bunch a of) facts, Jack!

  • *checks calendar*

    Huh. Maybe not.

leave a comment