Guitar Center Profit Up 38%

Strong holiday sales helped Guitar Center Inc., the country’s largest retailer of guitars and other musical equipment, post a 38% increase in fourth-quarter profit.

The Westlake Village-based company also confirmed that it planned to acquire Frederick, Md.-based Music & Arts Center, a privately held chain of 62 stores that offers music lessons and sells and rents band instruments, for about $90 million.

Guitar Center reported net income of $27.1 million, or 95 cents a share, up from $19.7 million, or 78 cents, for the fourth quarter of 2003.

Net income included a one-time charge of 4 cents a share related to the retirement of former co-Chief Executive Larry Thomas.

The results beat Wall Street’s consensus estimate of 94 cents a share, excluding items, and topped the company’s forecast of 89 cents to 92 cents.

Sales rose 18% to $468.9 million, driven by a 10% jump in same-store sales at its flagship Guitar Center stores, which accounted for about 77% of the company’s total sales.

CEO Marty Albertson said in a statement that the company’s December “Guitar-a-thon” campaign drove sales, while other holiday-season promotions generated more sales in its mail-order division, Musician’s Friend.

Investors were heartened by the positive earnings and news of the Music & Arts Center acquisition, said Joan Storms, an analyst at Wedbush Morgan Securities.

Guitar Center shares rose $1.67 to an all-time high of $58.92 on Nasdaq.

Guitar Center expects to complete the Music & Arts acquisition, which was first reported Wednesday by The Times, in April or May and plans to merge those stores with its American Music division, a 19-store chain targeted at much the same market as Music & Arts.

“The one worry in the back of some investors’ minds was the [American Music] group,” which the company predicted would post a $2.5-million operating loss for 2005, Storms said.

The company forecast earnings for the first quarter of 2005 of 48 to 52 cents a share on sales of $390.6 million to $399 million.

For all of 2004, the company earned $63.4 million, or $2.36 a share, compared with $36.9 million, or $1.50, in 2003. Sales increased 19% to $1.5 billion.