(CBS NEWS) – The nation’s largest musical instrument store, Guitar Center, has become the latest bankruptcy victim of the coronavirus pandemic.
The company filed for Chapter 11 bankruptcy Friday,while saying that its 510 stores and website would remain open through the holiday shopping season. Filing for bankruptcy is “an important and positive step in our process to significantly reduce our debt,” CEO Ron Japinga said in a statement.
Guitar Center said it is honoring gift cards, store credits, prepaid music lessons and other orders while in bankruptcy.
Guitar Center joins Chuck E. Cheese, Hertz, J. Crew, J.C. Penney, Neiman Marcus and other national retailers that have filed for bankruptcy protection amid coronavirus lockdowns. There have been more than 3,600 Chapter 11 filings from companies as of June 30 — a 26% jump from the year-ago period, according to data from Epiq Global.
Guitar Center has more than $1.3 billion in debt, and company officials said they’ve created a reorganization plan that will reduce that figure by almost $800 million. Guitar Center plans to exit bankruptcy by year-end.
California-based Guitar Center, which opened in 1959, sells music equipment and rents orchestral instruments to schools through its Music & Arts centers. The company employs more than 13,000 people and reported $2.3 billion in revenue in 2019. Private equity firm Ares Management bought Guitar Center and took it private in 2014.
In court documents, Guitar Center said store sales declined this year mainly because of temporary closures due to the pandemic. The company had 10 straight profitable quarters between February 2019 and 2020 and was “on extraordinarily sound footing” prior to the health crisis, Guitar Center said in court documents.
Stores reopened with limited capacity in March, April and May and that caused in-stores sales to plummet while online orders rose, the company said.
“At the height of the pandemic, Guitar Center took the devastating step of furloughing over 8,750 of its — at the time — 13,000 plus employees,” the company said in court documents, adding that about 875 employees remain furloughed.