Fender CEO: We’re ‘running at full tilt’ amid record demand
Although the coronavirus pandemic has devastated many small businesses, companies like guitar maker Fender have managed to not just hold on, but thrive.
“When the lockdowns went and took place in March, I never would have predicted in my wildest dreams that the company was going to end up having a record year,” Fender CEO Andy Mooney told Yahoo Finance Live (video above). “But in fact, that's what's going to happen. We're literally running at full tilt to keep pace with demand through the end of this year and the beginning of next.”
The surprise upside during recession times that Mooney described isn’t entirely unexpected. Last year around the same time, he told Yahoo Finance that he believed the company was “recession-resistant.” The company’s estimated global revenue for 2020 so far is over $533 million, even as the world battles a pandemic that has killed over 1 million people so far.
‘Absolute tsunami of new players’
Stay-at-home orders, which forced many Americans into quarantine or isolation, was a pivotal moment for Fender.
“People really used their time to invest in themselves, learning how to play a musical instrument, a guitar in particular, seemed to be near the top of their list,” Mooney explained.
As a result, the company has seen “an absolute tsunami of new players coming into the market,” he added, and their “biggest issue now is just finding supply to meet the increased demand.” The company isn’t publicly listed, but local news reports from around the country have indicated similar trends.
Between late March and June, Fender’s guitar-instruction app, Fender Play, saw a major increase in users to 930,000 from 150,000 according to the New York Times. Among those new users, 70% were under the age of 45 and nearly 20% were under 24 years old.
It’s not just newbies who are boosting demand, though, Mooney stressed.
“We've seen a boost in sales to artists,” he said. “And we've also seen a big boost in home recording equipment. So the artists are not idle. They're continuing to create, and create at higher levels than any time in history.”
‘No doubt’ that guitar prices will increase
Unfortunately, the surge in interest hasn’t helped Guitar Center Inc., the largest musical instrument seller in the U.S. The company, which has more than 300 stores across the country, is considering filing for bankruptcy, as it struggles with its debt, Bloomberg reported.
Meanwhile, for Fender fans, although the company is showing no signs of slowing down, guitars are likely to become more expensive as the pandemic plays out.
“There's no doubt,” Mooney said. “Labor rates are going up on multiple fronts [in] California, South America, Southeast Asia. And then the costs of production are going up because of the impact of COVID, again, without a doubt.”
And so, he added, expect “some significant price increases from us going into the spring of next year.”
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Aarthi is a reporter for Yahoo Finance. Follow her on Twitter @aarthiswami.
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