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WESTLAKE VILLAGE, CA—Slowing guitar sales, more expensive occupancy costs and investments in multi-channel retailing led to a weaker than expected third quarter at Guitar Center, executives said at the company’s third-quarter conference call.

The musical instrument retailer launched another selling site, guitarcenter.com in June, complementing its existing musiciansfriend.com. But plans about brick-and-mortar store expansion for 2007 are undecided.

“We’re still evaluating that,” said Marty Albertson, chairman and CEO.

The company already has opened units in Roseville, CA, and New London, CT in the fourth quarter. Two more stores are scheduled to open in Murrieta, CA, and Lexington, KY, in the fourth quarter. Seven stores opened in the third quarter.

Comp-store sales were soft through much of the quarter at Guitar Center units, increasing 2.9%, the low end of the expected range. Stronger sales in September helped boost a difficult July and August.

“We remain confident in our long-term position and in our multi-channel strategy,” said Erick Mason, executive vice president and CFO.

Consolidated net sales increased 12.3% to $472.7 million in the third quarter. Net sales from Guitar Center stores increased 13.7% to $352.5 million. Net income was $11.3 million, compared to net income of $14.4 million in the third quarter of last year.

Guitar Center operates more than 195 Guitar Center stores across the United States. Its Music & Arts division, which sells and rents band instruments, operates more than 90 stores specializing in band instruments for sale and rental, serving teachers, band directors, college professors and students.

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