Guitar Center Plans 18 New Locations

Guitar Center executives discussed the company's expansion plans during a conference call in which the Westlake Village-based company reported first-quarter net income of $17.2 million and 57 cents per diluted share for the first quarter ended March 31, against net income of $15.7 million and 55 cents per diluted share in the first quarter the year before. Total sales increased 13.5% to $534.5 million in the first quarter from $470.7 million in the year-before quarter.Erick Mason, EVP and chief financial officer for the Guitar Center, commented in the conference call that the results "exceeded our expectations." He noted that growth in sales came mainly as a result of new store openings, adding that the company is proceeding with its store expansion plans. During the quarter, the company opened 12 new Guitar Center stores, including the acquisition of the former Victor's House of Music location in Paramus, NJ.

The 12 new stores that opened during the quarter included five of what the Guitar Center calls "primary format" stores, including the Victor's House of Music acquisition, as well as seven secondary format stores. The company's primary store format is its "large box" retail store of 17,000 sf, designed for the largest cities and markets. The secondary format is the company's 10,000-sf store, which is designed for cities with populations of from 250,000 to 900,000. Guitar Center executives have said in past presentations that the company sees the potential to expand to 160 locations of each of the formats.

Marty Albertson, chairman and CEO, said that the opening of the 12 stores in the quarter was "consistent with our expansion plan to open a significant portion of our new stores in the first half of this year." Albertson noted that although the Guitar Center has re-branded the Victor's House of Music location, it has not yet remodeled it.

In the second quarter to date, the company has already opened one secondary format store in Killeen, TX. The company now operates more than 210 Guitar Center stores across the US; in addition, its Music & Arts division operates more than 95 stores specializing in band instruments for sale and rental, serving teachers, band directors, college professors and students. The Guitar Center is alsothe largest direct response retailer of musical instruments in the US through its wholly owned subsidiary, Musician's Friend Inc.

Albertson also commented in the conference call that the Guitar Center's retail stores' performance was largely driven by new stores. Albertson added that the retail locations performed well "despite continued industry challenges."