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Guitar Center 1st Quarter Sales Increase

Guitar Center has filed its financial results for the first quarter of 2006, which ended March 31.

Consolidated net sales increased 18.8 percent to $470.7 million from $396.4 million in the prior year period. Net income in the first quarter was $15.7 million, or 55 cents when diluted per share. Last year's first quarter saw a net income of $15.9 million.

A few factors outside of sales reduced income. These included a $900,000 charge resulting from the retirement of the company's former chief financial officer and $1.1 million in stock-based compensation that should have been accrued in the fourth quarter of 2005.

During the quarter, Guitar Center opened three primary-market stores, six secondary-market stores and one tertiary-market store. Net sales for Guitar Center stores increased 15.2 percent, to $339.3 million, with 58.9 percent of that increase coming from the new stores.

Musician's Friend had a net sales increase of 7.4 percent, to $98.3 million, while gross profit dipped 1 percent, to 29.2 percent, compared to 2005's first quarter. Guitar Center attributed the profit drop to a drop in margin that resulted from reduced shipping and handling revenue.

Net sales at Music & Arts were $33.2 million in the first quarter of 2006, compared to the $10.2 million that American Music brought in during the first quarter of 2005.

By the time the financial results were filed in late April, Guitar Center had already opened two primary-market stores and one secondary market store during the second quarter. Based on current business and economic conditions, Guitar Center predicts net sales in the second quarter of 2006 to be between $453 million and $462 million.