Two years ago, Guitar Center (Nasdaq: GTRC) began exploring shifting from a drop ship distribution method to a centralized distribution strategy for its more than 100 musical instrument stores across the U.S.  A sizeable investment, which would temporarily impact the Company’s earnings, was required to make this shift. 


FD Morgen-Walke worked with Guitar Center’s management team to develop key message points that would maintain investor and analyst support for this important corporate initiative.  We surveyed Guitar Center’s key opinion leaders within the investment community to determine what concerns existed regarding the shift in distribution strategy and then aided the Company in introducing the change in distribution strategy on quarterly earnings calls beginning in 2001. 


In all communications with Wall Street, Guitar Center clearly communicated each stage of the implementation of the new distribution strategy, keeping key constituencies apprised of successes, challenges and implementation milestones, while emphasizing the long-terms benefits to the Company and its shareholders, vendors and customers.  The distribution center communications program FD Morgen-Walke designed and implemented for Guitar Center culminated in an Investor/Analyst Field Trip to view the newly opened facility in October 2002.  With our counsel and through our efforts, we believe that Guitar Center management communicated the milestones of this critical business investment with maximum credibility and responsiveness, building additional Wall Street support as a result.  

Objectives and Strategy


The objectives of our investor relations program for Guitar Center were to implement a communications program to maintain analyst and investor support during the shift to a centralized distribution strategy and to highlight the Company’s long-term growth prospects.  Specific program goals included:

  • Develop messaging to announce a major capital investment by the Company in a new distribution center on the Company’s 2002 guidance call.
  • Manage Wall Street reaction to the subsequent temporary decline in year-over-year quarterly earnings.
  • Develop key messages for press releases, scripts and presentations to communicate realistic earnings expectations, highlight the benefits of the new distribution strategy and concentrate on the long-term growth prospects of Guitar Center.
  • Develop a media strategy to ensure accurate coverage of earnings and direct focus toward the continuing expansion of the Company.




Drafted a conference call script for the Company’s annual guidance call in November 2001 that clearly outlined plans for the build-out and launch of the planned facility, as well as the long-term benefits of the centralized distribution strategy. 


Surveyed the investment community following the initial announcement and obtained regular feedback throughout the year in conjunction with marketing trips, conferences and earnings conference calls.


Developed one-on-one relationships with key wire reporters (Dow Jones, Reuters) and local media so that reporters would get a full understanding of Guitar Center’s financial results and the reason for the year-over-year declines in earnings per share.


Developed a new investor presentation, specifically highlighting objectives of the new distribution strategy and the stages of distribution center build-out.


Maximized the opportunity to disclose completion of key phases of implementing the new distribution strategy in the four earnings releases and conference calls throughout 2002.


Maintained regular communications with investors and analysts regarding the progress and eventual launch of the new distribution facility. Guitar Center presented at six investment conferences and conducted four road shows during the distribution center build-out phases to support analysts and provide frequent updates on the progress of this venture.


Organized a 2-day field trip for analysts and investors to visit the new distribution center and meet the distribution center management team, once the facility was fully operational in October 2002. 




Since the opening of the new distribution facility in late summer 2002, in written reports, privately and verbally in public forums such as investment conferences, financial analysts and investors have applauded Guitar Center’s success and open communication throughout the distribution center project.  Specific results include:

  • Since the initiation of this investor relations program in mid-November 2001, Guitar Center’s stock price increased 49% from $13.05 to $19.48 as of January 31, 2003, despite a weak general retail and economic environment.
  • Several institutions including Janus Capital, Skyline Asset Management and Blackrock Advisors initiated large shareholder positions in the last year.  Vinik Asset Management increased its investment in the Company following a marketing trip by Guitar Center management discussing the distribution strategy.
  • Twenty-five sell- and buy-side investment professionals attended the field trip to the new distribution center.  Feedback and resulting analyst reports were very favorable. 
  • CL King initiated research coverage of Guitar Center on December 18, 2002, following attendance at the field trip to the distribution facility.
  • Broadcast interviews with Bloomberg, CNNfn, and CNBC were secured throughout the year to give management opportunities to reiterate long-term strategies for growth.
  • Print media and wire service coverage was achieved highlighting revenue growth, meeting or exceeding earnings expectations and noting the investment in the distribution center for clarity on earnings.
  • A trade article was issued on the implementation of the new distribution strategy and its benefits.