Guitar Center Details Expansion

The company's primary store format is its "large box" retail store of 17,000 sf, about 135 of which the Guitar Center operates today, Albertson told the crowd. Although Albertson talked of the potential for a total of "about 160" of those large box stores, he noted that "In Chicago about two weeks ago, we opened three more stores on one night to see if we could get greater saturation out of large cities, and if that proves successful, we will see many more opportunities for large boxes in the US."

The second-largest format is the company's 10,000-sf store, which is designed for cities with populations of from 250,000 to 900,000. The Guitar Center operates 46 of these today and believes there are opportunities to expand to 160 locations.

The third format is the 5,000-sf store, two of which are in operation, with another scheduled to open this year. If the new format succeeds, the chain sees the potential for 90 to 100 of the 5,000-sf stores, Albertson said.

In addition to growth via its three existing formats, the company sees potential in acquiring some of the approximately 7,700 mom-and-pop musical instrument stores in the US. The Guitar Center sees "a significant number of acquisition opportunities" at those stores because many of the owners are getting older and want to get out of the business, according to Albertson. He described the musical instrument storefront world as "very fragmented" except for the Guitar Center and a couple of other chains.

Albertson pointed out that the Guitar Center does not compete in the sound system contracting and installation segment of the industry, which accounts for about $12 billion to $13 billion of the annual $20 billion industry. He explained that the company still sees substantial potential for growth in the segments where it does compete, which account for the remaining $7 billion to $8 billion of annual sales.

The sound system contractor business includes the installation of public address systems, sound and video systems and other equipment in football stadiums, churches and other venues. "We sell a lot of this equipment, but primarily to musicians and small churches and clubs that don't require installation and design," Albertson pointed out. He said it is "an area we plan to enter in the future, but today there is plenty of growth in the instrument category that will fuel us for the next several years."