Those who attended the Professional Services Executive Roundtable in Westlake Village recently probably expected the keynote speaker, Guitar Center CEO Marty Albertson, to talk about gross margins and inventory control and all the other things that are key to the retail industry. What they got was a look behind the numbers that, until recently, made the Westlake Village-based company a Wall Street darling with an average annual earnings growth of 18 percent in the last five years. There was Albertson, a once-aspiring record producer living in Haight Ashbury who started working at Guitar Center as a salesman and rose to head the $1.8 billion public company, talking about passion and dreams, about the soul of the musician and the gift of music. To the 30-odd members of PSER, a loosely knit band of CEOs, CFOs and other senior-level executives mostly working in the Conejo Valley and organized by Carlo Brignardello, a principal with CRESA Partners, Albertson told a story of what propelled Guitar Center. Founded in 1964, the retailer of guitars as well as other instruments and recording equipment, grew up in the heyday of rock and roll. And while those early customers have since grown and, for the most part, given up dreams of becoming the next rock icon, that fantasy still drives the business. “To some of you, Guitar Center maybe represents a dream you once had,” Albertson said. “We represent these dreams to a lot of people.” Today, many of Guitar Center’s customers are baby boomers who are bringing their children to the stores along with imaginings that sons and daughters may be able to accomplish what fathers and mothers did not. Most of the salespeople at Guitar Center stores are musicians whose passion for music, along with Guitar Center’s policy of allowing shoppers to spend as much time as they wish to in the store and try out any of the instruments displayed, has helped to develop a loyal customer base,” Albertson said. Musical Wal-Mart It also helps to put a different sort of face on the company. With about 187 stores and an average 25 percent share in most markets – anywhere from 40 percent to 60 percent market share in some Guitar Center is, in many ways, the Wal-Mart of music stores. When the company went public in 1997 the money it raised was pumped into developing a sophisticated infrastructure that gives Guitar Center scalable distribution, inventory control and other systems and allowed the company to open some 30 to 40 new stores a year and still get an average inventory turn of three and one-half times a year, compared to twice a year for most music stores. Guitar Center has been on an aggressive buying spree, acquiring a number of small music store chains as well as online businesses. The company has amassed a mailing list of 20 million names that it mines regularly and, with about $400 million of its revenue coming from direct sales, Guitar Center is among the top 50 direct retailers in the country. Albertson himself did not demur when he discussed how he regards the company’s competitive position in the marketplace. “We don’t wake up every day and put our sites on the mom and pop store next door,” he said. “But the customer has a choice. And we choose to take a proactive stand and go after the customer. I’ve received notes from businesses who feel we were the reason they went out of business. The reality is you have to grow or get grown over.” The company, Albertson said, is built on three core principles, clarity of vision well communicated to the workforce, discipline of execution drilled down to every level in the company and teamwork. And of course, the dream. “The true gift is to be able to play music,” Albertson said. “To be able to sit down and really appreciate the interaction with an instrument is unique.”
