Guitar Center to File for Bankruptcy Protection
Guitar Center said last week that it expects to file for Chapter 11 bankruptcy protection after negotiating a debt-cutting deal with key investors and lenders. The country’s largest music instrument seller plans to emerge from protection before year’s-end with nearly $800 million less debt. By filing for Chapter 11 bankruptcy, Guitar Center would be able to continue operating its 300 retail stores during the restructuring process and be given a break on repaying debts. Guitar Center and its related brands — Music & Arts, Musician’s Friend, Woodwind Brasswind and AVDG — will continue to operate normally, as well as meet its financial obligations to vendors, suppliers and employees.
Total Retail's Take: Like most non-essential retailers, Guitar Center has been hit hard by the COVID-19 pandemic. While the company was already in debt, the pandemic tipped the scales towards bankruptcy. For example, Guitar Center was forced to temporarily close its stores in the early days of the pandemic, and while its online revenue jumped during that period, it wasn't enough to overcome the lost revenue from its shuttered retail stores. Guitar Center wisely tried to diversify its business by offering instrument repairs and music lessons, which have continued online during shutdowns, but bankruptcy was inevitable. With its Chapter 11 filing, Guitar Center can reduce its debt load and keep operating while management works on a turnaround strategy.