Legendary guitar maker Fender (FNDR) will test the public markets soon after announcing pricing for its shares. The company will be selling 10.71 million shares at a forecasted range of $13 to $15.
Founded in 1946 by Leo Fender, the company has gone on to become one of the most recognizable names in the music world. Brands owned by Fender include:
- Fender, Squier, Jackson, Guild, Ovation, Latin Percussion
Along with brands owned by the company, Fender also licenses the rights for Gretsch, EVH, Takamine, and Sabian cymbals. Fender products are found in 85 countries.
Strengths listed by Fender in its S-1 are:
- Portfolio of iconic and renowned lifestyle brands and association with leading musicians
- Industry leader with broad product portfolio
- Heritage of innovation and new product introductions
- Leading global footprint
- Distinguished management team and skilled work force
The biggest strength for Fender is its dominant market share. Fender ranks number one in the following categories:
- Electric Guitars
- Acoustic Guitars
- Bass Guitars
Sales for Fender's products come from:
- Independent Channel (Collection of 13,000 Music Stores): 58.7% of 2012 Sales
- National Channel, Online: 23.5% of 2012 Sales
- Third-Party Distributors: 17.8% of 2012 Sales
National chain Guitar World made up 13.8% of the most recent fiscal year's sales. Other large customers are Costco, Sam Ash, and Musician's Friend.
Net sales for Fender have grown each of the last year with reported numbers of $612.5 million (2010), $617.8 million (2011), and $700.6 million (2012). The company recognized net income of $3.2 million in the most recent fiscal 2012. This was after posting a loss of $17.3 million in fiscal 2011. Below is the breakdown of 2012 sales by musical category:
- Fretted Instruments: 59.5%
- Accessories: 18.9%
- Guitar Amplifiers: 12.1%
- Percussion: 9.1%
The company was acquired by CBS in 1965. Fender was bought back by two investors in 1985, with one still serving on the board of directors. Famous musicians through decades of countless genres have used Fender products. Some famous Fender customers include: Eric Clapton (pictured above), Jimi Hendrix, Stevie Ray Vaughan, Bruno Mars, Keith Urban, Mick Jones, Brad Paisley, The Edge, Kurt Cobain, and Bruce Springsteen.
Fender recently announced a partnership with Volkswagen (VLKAF.PK) to include a speaker system powered by the technology in Fender amplifiers. The company has grown through acquisitions and deals like the one with VW.
Even though my favorite guitar player (Clapton) plays a Fender, I can't recommend owning shares. In a tough economic market like the one many countries are in, guitars will be a luxury item. The company will always have sales thanks to a plethora of bands and solo artists around the world. Fender is a great company and in time could be a great investment, but I don't believe that time is now.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.