Dive Brief:
- Guitar Center on Wednesday announced its namesake and Musician’s Friend e-commerce store saw November and December preliminary sales increase 6.6%. CEO Gabe Dalporto said the quarter was the company’s strongest holiday season in years. The retailer on Thursday declined to share results for its Music & Arts segment.
- Dalporto also said the company is progressing on its four-part turnaround strategy, which involves adding more premium products to its assortment, enhancing its experiential retail offering, investing in the sales team and creating a smooth interface between stores, web and mobile.
- Guitar Center said its strategy is working and pointed to data showing customers spent 20% more time in stores during Q4, the company said.
Dive Insight:
Guitar Center moved further to center stage in the U.S. music retail segment after Sam Ash Music filed for bankruptcy last year. But despite occupying a nearly singular category killer position, Guitar Center faces high leverage and near-term debt maturities, according to a September analysis by Moody’s.
The privately held music retailer filed for and exited bankruptcy in late 2020. Now Guitar Center is at risk again, according to analysts, which landed it a mention on Retail Dive’s most recent bankruptcy watchlist. As part of the broader retail hobby sector, Guitar Center is among several companies that face weak demand as consumers have reduced their post-pandemic discretionary spending habits, Moody’s said.
As part of its turnaround plans, Guitar Center said it recently completed a revamp of its electric and acoustic guitar category offering. The retailer is also introducing interactive displays, launched a new customer relationship management system and established a phone-based concierge sales team focused on building long-term relationships with musicians.
“Taken together, these initiatives had a major impact on our peak holiday season, and we expect even more significant customer centric improvements heading into 2025,” Dalporto said.
Guitar Center also made other leadership changes in the last two years. Dalporto was named CEO in late 2023, replacing CEO Ron Japinga. At the same time, it named Tim Martin chief financial officer. In July, Adolfo Rodriguez joined as chief technology and information officer, with responsibility for leading the retailer’s tech strategy and enhancing the customer experience. And Mike Schultheis was appointed chief stores officer in October.
“From Guitar Center’s perspective, their investments in increasing foot traffic and extending time spent in stores appear to be a deliberate strategy to drive higher in-store conversion rates and gradually increase the average spending per customer,” Clayton Durant, an adjunct professor of music business at Long Island University's Roc Nation School of Music, Sports and Entertainment, told Retail Dive in an email.
The phone concierge approach mirrors the strategy long favored by Sweetwater, another key player in the music retail segment. But unlike Guitar Center, Sweetwater operates almost exclusively as an online-only business. Guitar Center has a 300-plus store footprint under its namesake banner and about 250 stores under the Music & Arts banner.
“However, the question remains whether Guitar Center can fully compete with Sweetwater in areas where Sweetwater has long excelled,” Durant said. “Sweetwater's brand ethos revolves around high-touch customer care, backed by significant investments in employee training — not to mention years of building and perfecting one of the top-performing customer-centric programs in U.S. retail.”
