Fender Guitar CFO Performs Throughout The Economic Blues

The Fender guitar brand has been around for 76 years, so it knows how to stand the test of time.

Famous musicians like Jimi Hendrix, Eric Clapton, Stevie Ray Vaughn, and many others have made the company’s wide range of iconic products very popular, so musicians of all ages have been clamouring for them for decades. It has made the brand a mainstay on holiday wish lists.

Fender’s Chief Financial Officer, Matt Janopaul, talked about how the company is more vital than ever after the pandemic and how what it learned from it is helping it figure out how to deal with the current macroeconomic climate.

Janopaul has been involved with Fender for more than 20 years. He started as an investor, then became president and chief operating officer, and in January, he became the company’s chief financial officer (CFO).

Janopaul said that the blues and some of the most famous types of guitar music in the history of the United States are connected to hard times. Because music is always needed, they know Fender will get to the other side. People play music to celebrate when things are going well, and when things are bad, they play music to feel better.

Prices, Stocks, and Interest Rates

So, how is the company dealing with the current consumer environment, where inflation is hurting consumer confidence, and almost 6% of the U.S. population is holding off on buying holiday gifts, including shiny new Fender Stratocasters, this year?

Janopaul thinks that consumers, at least those who buy musical instruments, still have enough money to buy them. He also says that Fender is ready for some softening on the lower end or entry level of its product lines, which is common when consumers are having trouble with their finances. Fender has been around through recessions, crises, wars, and just about everything else. In the first quarter of 2022, they broke all kinds of records, and when things started to slow down in the second quarter, they changed how we ran the business right away.

Fender’s internal data shows that learning to play the guitar was one of the most popular skills people picked up during the COVID-19 quarantines. About 16 million people, or 7% of the U.S. population between 13 and 64, decided to play the guitar for the first time during the pandemic.

Relationships With Suppliers

Fender has had to deal with supply chain bottlenecks, inventory pinch points, and even geopolitical crises to get its guitars, amps, and other products into the hands of this new group of musical hobbyists.

The cost of sending chips or amplifiers from Asia to California by ocean freight is now three to four times what he said it would be. They could pass on some price increases, but not all of them. For example, parts for their high-end tube amps came from Ukraine, and because of the situation there, they had to wait a long time for those parts. But there have always been shortages in their business, so they’ve always had to be very flexible.

The company can also use its suite of next-generation technology and tools, which are the best in the industry, to get through tough economic times.

Janopaul says that they have a dealer portal that lets all of their retail partners look at our inventory, see what’s there, and place an order. The next day, it goes into our fulfilment system and is sent by FedEx wherever it needs to go. He thinks that makes it much easier for our dealers to meet customer needs.

Still, he said many wholesale orders were cancelled this past year because retailers cut back their spending.

The only good thing about this is that, from a cash flow point of view, they are in good shape to meet the needs of the industry through 2023, as he said.

Price of Running a Business

Fender is known around the world. Teenagers in Ohio and Okinawa are just as likely to play a Stratocaster or a Telecaster proudly. Janopaul said half of the company’s sales are made outside the United States.

He said that the currency problems they had this year were big. Since so many of their sales are overseas, they’ve had to deal with this, but they have a good strategy for hedging that has helped a lot. But when it comes to budgeting money, he wants to be as careful as possible.

Janopaul said that the company’s main goals for the new year are to be careful with spending and to be flexible in meeting the needs of both B2C and B2B customers for products and inventory as well as it can.

Fender’s CFO said they would have to wait and see what happens in other areas, such as cryptocurrency and verified resale or trade-in programs.