Usually, a brand files bankruptcy after a prolonged public struggle. Fans of the company may notice that something has gone wrong as cuts are made in customer service or orders take much longer to fill.
In the retail space, regular customers can notice that inventory starts to thin. Shelves start to look a little bit bare and many items are only offered in the least-popular sizes.
Related: Popular grocery chain closing over 30 stores
It’s a vicious circle that almost always has the same result. Vendors who have not been paid demand upfront payment or to be paid for past orders before they ship merchandise.
The retailer does not have the needed cash so it delays ordering and that gives it less to sell. It’s impossible, of course, to generate revenue without increasing sales. You can’t cut your way to success as lowering expenses does not make up for dropping sales.
In the end, a Chapter 11 bankruptcy filing is nearly always the result unless a financial savior steps in. Fans of Fernandes Guitars, a company famous for its affordable knockoffs of Fender and Gibson guitars filed for bankruptcy on July 13.
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Fernandes made affordable guitars.
Image source: Guitar Center
Fernandes Guitars had a big following
Fernandes Guitars abruptly shut down and its website does little to explain what happened to its many fans. The site offers a simple message:
“Fernandes USA division has closed,” it shared.
While the company is known for its budget offerings, its guitars have been played by some very famous musicians.
Green Day’s Billie Joe Armstrong has used his Fernandes Revival RST-50 (based on the Fender Strat) onstage and has shared that he has been playing that guitar since he was 10 years old.
The company shared its history on its website in Japan, a division of the company that appears to still be operating.
“Over the past few years, the electric guitar market has expanded significantly to include not only young people in their teens and twenties but also people in their thirties and forties. It can be said that we are now in an era where people can casually play and enjoy music, rather than just listening to it,” the company shared.
Fernandes began operations in 1969 and began making guitars in 1972.
“Today, as Japan’s top guitar manufacturer, the company enjoys support from a wide range of people, from beginners to professional musicians, not only in Japan but also in the United States, Europe, and Asia,” the company added.
Fernandes USA appears headed to liquidation
Prior to its abrupt shutdown, Fernandes shared a statement on its website which Guitar.com captured.
“Fernandes Co., Ltd. (hereinafter referred to as ‘Fernandes’) is currently owed a considerable amount of debt to multiple creditors, and unfortunately, it has become impossible to continue business,” the company posted.
The company intends to file for Chapter 11 bankruptcy protection which may be because it hopes to find a buyer.
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“We apologize for the inconvenience caused to creditors and related parties, but in light of the total amount of debt, Fernandes plans to file for bankruptcy proceedings as soon as possible,” the statement continues. “Creditors and business partners who have claims or debts against Fernandes will be contacted in writing by the attorney representing them in the bankruptcy proceedings…We apologize for the inconvenience and thank you for your patronage over the years.”
Gibson Guitars successfully filed for Chapter 11 bankruptcy in 2018 and was able to find a buyer to fund continuing operations. Sam Ash, the well-loved music store chain, filed for bankruptcy this year and has been liquidated and sold. Its new owner will operate a website, but no brick-and-mortar retail locations.
