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STRIKING A SOUR NOTE; FRETTING SINKS GUITAR CENTER SHARES.

Byline: Enrique Rivero Daily News Staff Writer

Despite reporting a profitable year, Guitar Center Inc.'s stock fell nearly 22 percent Friday as investors dumped shares on fears that the company would be hurt by increasing competition among music instrument retailers.

The Agoura Hills-based company reported after the markets closed Thursday that its pro forma per share earnings were 71 cents for the year - just one cent below analysts' consensus predictions, but 31 percent above the prior year's results. It met analysts' 30 cent prediction for the fourth quarter, up 25 percent from the like 1997 period.

Still, Guitar Center stock closed Friday at $17.75, down $4.9375, on volume of 936,100 shares traded compared with a 30-day average of 155,000 shares - even as analysts remained upbeat about the company's present and future position in what they deem a highly competitive market.

Investors shouldn't be scared off by the degree of competition in the market given that Guitar Center's ``vital signs'' remain strong, said Alan Rifkin, a managing director at Piper Jaffray Inc. in Minneapolis.

``They believe that, going forward, sales and margins will come under pressure as the competitive environment intensifies,'' he said. ``I personally believe this is (an) overreaction here.''

Bruce Ross, Guitar Center's chief financial officer, said that investors may have misinterpreted comments he made during a conference call with analysts when results were released, regarding a proposed distribution and fulfillment center.

``That was misinterpreted that we were going to spend a few million dollars doing that,'' Ross said. ``All we indicated is that we moved it up as a priority and we're doing a study.''

The company should have details about this plan, and its financial impact on the company, when it releases its first quarter results on April 28.

Dean Ramos, an analyst at George K. Baum & Co. in Minneapolis, said Guitar Center's competitors have been more aggressive of late, but the company's fundamentals remain strong. ``I thought the numbers were pretty good; we really didn't see any issues in the numbers they reported,'' Ramos said.
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Title Annotation:BUSINESS
Publication:Daily News (Los Angeles, CA)
Geographic Code:1USA
Date:Feb 13, 1999
Words:344
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