Guitar Center furloughs 9,000 employees in response to COVID-19

CEO Ron Japinga describes “difficult decision” to furlough more than 80 per cent of its staff and warns the retail giant is “evaluating numerous other options” to ride out current crisis.

Musical instrument retail giant Guitar Center has furloughed a large number of its staff in response to the global COVID-19 pandemic, which has led to the enforced temporary closure of many of its stores across the USA.

In a letter obtained by Music Trades dated 31 March 2020, Guitar Center’s CEO Ron Japinga confirms that more than 9,000 of the company’s estimated 11,000 staff across both Guitar Center and Music & Arts stores will be furloughed. Affected staff will receive benefits until the end of April, as well as pay extensions, while Japinga himself has opted to forgo his salary entirely, and senior management figures have also agreed to take pay cuts.

“While our digital businesses and call centres remain open currently, they do not make up for the significant impact from our store closures,” Music Trades reports Japinga as writing. “As you can appreciate, COVID-19 has had a dramatic negative impact on our business and will continue to have an impact for the foreseeable future. This impact is being felt throughout the retail industry. We’ve taken actions to improve our position by freezing spending, deferring capital spend, reducing receipts, and evaluating numerous other options.”

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Non-essential businesses across America have been closed until further notice in an attempt to slow the spread of the Coronavirus epidemic, with many States now under ‘shelter in place’ orders that restrict movement for all but essential reasons. The lockdown has been devastating for brick and mortar retailers across the globe, and as America’s biggest instrument store, Guitar Center was always likely to be hit hard.

The news of the furlough comes at a tough time for the company – just last month GC had its credit rating downgraded to Negative by Moody’s, with the agency reporting that “leverage remains high and cash flow is limited”.

It paints a worrying picture for Guitar Center, with Japinga sounding his own warning claiming, “Further difficult decisions will need to be made in the months ahead to maintain the viability of our businesses as well as support our dedicated associates during this challenging period.”

Nevertheless, Japinga stresses that the company hopes that Guitar Center can weather the storm and come out the other side, adding, “It is our fervent hope that we can bring these associates back to work once this crisis has passed”.

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