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August 18 , 2006

Texas a Market of Note for Music Retail Giants

August 18th, 2006 - Guitar Center, Sam Ash Music consider expansion options Sandra Zaragoza Staff Writer The two largest music chains in the country are hearing the lucrative call of Texas and its music, from high school marching bands to live music on Austin's Sixth Street. Guitar Center Inc. -- the leading seller of guitars, drums, keyboards and sound equipment in the nation -- is aggressive about its growth both nationally and in Texas, says Robert Stannard, the company's vice president of real estate. Meanwhile, the second-largest music retailer in the United States, Sam Ash Music Corp., says it's also considering expanding its presence in the Texas market. The retailer, based in Hicksville, N.Y., has a 1-year-old store in San Antonio. Last week, Westlake Village, Calif.-based Guitar Center Inc. (Nasdaq: GTRC) opened the doors of its new Lewisville store to long lines of customers. About 1,200 people showed up for the grand opening, which featured live music and markdowns, according to the store's general manager, Peter Thyssen. Guitar Center has 18 stores in the Lone Star State, including one location each in Arlington, Dallas, Fort Worth, North Dallas, Plano and, now, Lewisville. The growing populations of Dallas-Fort Worth and Houston make Texas an ideal market for Guitar Center, which is looking to grow in larger metropolitan markets, said Terry Syler, of Dallas-based The Retail Connection, a retail brokerage that counts Guitar Center as a client. Neither company would talk specifics about their growth plans, but Guitar Center, which has 187 stores nationwide, has said it plans to open seven stores nationally in the next few months. Sam Ash Music operates 45 stores in 14 states and says it plans to open four stores across the country by the end of the year. The company declined to say whether any of those would be in Texas. But Paul Ash, president of the family-owned company, says there are a number of reasons Texas is on the radar for his company. "There is a vibrant music scene; a lot of young people. Texas is also big in school marching bands. There is a lot of potential business," he said. Baby boomers looking for high-end music instruments are another target customer base, said Ash, adding that being a family-owned store, having price guarantees, extended service plans and a merchandise mix that includes a number of high school band instruments all have helped the company compete against Guitar Center and others. The high number of churches in Texas, many with bands and choirs that buy sound equipment and instruments, also bodes well for music retailers, he said. Promotional events Guitar Center is viewed by many as the superstore of music stores -- a place where customers can pick up everything from guitar strings to amplifiers. The 42-year-old music merchandise giant generated $1.3 billion in sales in 2005. Guitar Center has been able to increase its customer base by staging promotional events, including yearly music competitions that attract traffic to the stores. In the not-so-distant future, Guitar Center likely will inherit the title of largest music chain in Texas. Dallas-based Brook Mays Music Co., which caters to high school band and orchestra students, plans to shutter 62 stores and liquidate its merchandise. Brook Mays is closing its 12 D-FW stores as part of its Chapter 11 bankruptcy proceedings. Many other independent music retailers, unable to beat the chains' low prices, also have left the local market, says Mike Skwarek, who manages Musicians Headquarters in Balch Springs, east of Dallas. He says the more-than-20-year-old shop, which sells new and used merchandise, has relied on its reputation and expert staff to stay competitive.
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