Guitar/10.2/dp1st/mark2nd
By EDVARD PETTERSSON
Staff Reporter
Jimmy Page wannabes will have to look someplace other than their local Guitar Center to buy a Gibson Les Paul Standard, the guitar used by Page on classic Led Zeppelin recordings.
Agoura Hills-based Guitar Center Inc. and Gibson Musical Instruments said last week they have terminated their business relationship, and Guitar Center will no longer carry what many consider the Cadillac of guitars.
“It was a mutual decision,” said Guitar Center Chief Financial Officer Bruce Ross, downplaying the significance of the falling out. “This is certainly not a big loss to the company. The Gibson line is only 2 percent of our business, and we decided to invest this money in a line of inventory that is more profitable for us.”
Officials with Nashville-based Gibson had no comment.
The disagreement between the two companies resulted from Gibson’s demand that Guitar Center carry its entire line of guitars, according to Ross. However, the high-priced Gibson guitars take up a lot of store space while selling at a slow pace, he said.
A new Gibson Les Paul Standard sells for around $1,800, and a Classic ES-335 costs over $2,000.
Ross said Guitar Center will replace the Gibson models with, among others, Paul Reed Smith guitars. Gibson’s less-expensive Epiphone brand will be replaced by Yamaha instruments.
On the day of the announcement, Guitar Center stock fell almost 20 percent, from a closing price of $16.50 on Friday, April 23 to $13.31 on the following Monday.
Tom Kelleher, an analyst with B. Riley & Co., pointed out that Guitar Center has been a leader in the industry for many years, but is starting to face more competition from other large retailers such as Hicksville, N.Y.-based Sam Ash Music Corp.
“It may be time for (Guitar Center) to regroup and to rethink their long-term strategy,” he said. “It’s never good news when a major brand comes out and says they don’t want to do business with you anymore The main question is whether this is a sign of things to come.”
Guitar Center share prices recovered somewhat since the announcement on the strength of a positive first-quarter earnings report.
The company announced net income, on a pro forma adjusted basis, of $3.7 million ($0.18 per share) for the first quarter ended March 31, compared with $2.7 million ($0.13 per share) for the like period a year ago.
