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Guitar Center Posts Improved Holiday Results, Refinances Debt

...to retire secured bonds that were set to mature in April of 2019. By effectively extending the maturity of its debt, GC is ensured financial stability for the next three years.

Separately, the company reported improved results for the nine-week period ending December 30, 2017. Net revenues for the company, including Guitar Center stores, Music & Arts, and Musician’s Friend, advanced 1.7% for the period. Sales at Guitar Center locations open for more than 12 months increased by 2.8%, and gross margin dollars increased by approximately 7.4%.

CEO Ron Japinga said GC is “pleased” with the holiday season results and with the company’s “continued strategic and operational progress.” He added that the retailer aims to make “continued progress in the upcoming fiscal year.” CFO Tim Martin said that the company has seen “continued improvement in sales growth” and has delivered margin expansion while controlling expenses and working capital. The CFO added that the company’s liquidity and availability under its revolving credit facility “remain substantially ahead of last year” and that management is pleased with cash flow generation.

Guitar Center estimates that its fiscal 2017 gross profit margin will be in the range of 41.3% to 41.5% of net sales, versus its previous guidance of 40.8% to 41.2% of net sales. The company also narrowed its expectations for net sales to an estimated range of $2.183 billion to $2.19 billion, from previous guidance of $2.18 billion to $2.235 billion. Management said it now expects fiscal year 2017 capital expenditures, net of tenant allowances received, to be between $63 million and $65 million.

Japinga also indicated that the recent acquisition of Audio Visual Design Group, which offers system design and installation in both corporate and residential markets, will enhance EBITDA by approximately $3.0 million.

Separately, Guitar Center opened a new location in Manchester, New Hampshire as the first of eight new stores planned for 2018. In addition, the retailer will continue adding lessons programs to existing Guitar Center locations. The Music & Arts division is planning to add 20 new stores in 2018.

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