The country’s largest musical instrument store, Guitar Center, has become the latest victim of the bankruptcy of the.
The company filed for Chapter 11 bankruptcy on Saturday, while saying that its 510 stores and website would remain open during the holiday shopping season. The bankruptcy filing is “an important and positive step in our process of significantly reducing our debt,” CEO Ron Japinga said in a statement.
Guitar Center said it honored gift cards, store credits, prepaid music lessons and other orders in bankruptcy.
The Guitar Center joins Chuck E. Cheese, Hertz, J Crew, JC Penney, Neiman Marcus and other national retailers who have filed for bankruptcy amid coronavirus lockdowns. As of June 30, there had been more than 3,600 corporate Chapter 11 filings, a 26% jump from the previous year, according to The data from Epiq Global.
Guitar Center has more than $ 1.3 billion in debt, and company officials say they’ve created a reorganization plan that will reduce that figure by nearly $ 800 million. Guitar Center plans to come out of bankruptcy by the end of the year.
The California-based Guitar Center, which opened in 1959, sells musical equipment and rents orchestral instruments to schools through its music and art centers. The company employs more than 13,000 people and had sales of $ 2.3 billion in 2019. Private equity firm Ares Management bought Guitar Center and private it in 2014.
In court documents, Guitar Center said store sales declined this year, mainly due to temporary closures due to the pandemic. The company had 10 consecutive profitable quarters between February 2019 and 2020 and was “on extraordinarily sound footing” before the health crisis, Guitar Center said in court documents.
Stores reopened with limited capacity in March, April and May, causing in-store sales to plummet as online orders increased, the company said.
“At the height of the pandemic, Guitar Center made the devastating decision to lay off more than 8,750 of its – at the time – more than 13,000 employees,” the company said in court documents, adding that approximately 875 employees remained on leave.