Thursday, March 06, 2008

Another victim of the Bush recession

Gift cards.
You know that Sharper Image gift card you got for Christmas? Right now, it's worthless. And other gift cards in your wallet could lose their value, too. [...]

The Sharper Image announced late last month that it was suspending the acceptance of gift cards, at least temporarily. It urged shoppers to check the company Web site later this month for an update. That is typical of businesses that reorganize under Chapter 11 bankruptcy, which treats gift cards as a loan to the company, not as cash.
Gift card holders are at the bottom of the pecking order when a company files for bankruptcy (except for CEOs), so if you have any cards stashed away you might want to spend them. The retail environment isn't expected to improve.
The number of retail bankruptcies or liquidations this year is expected to reach the highest levels since the 1991 recession. [emphasis mine]

Brian Riley, senior analyst at The Tower Group, estimates that shoppers could lose more than $75 million just from stores and restaurant closings in 2008.

Tower Group's figure doesn't include mom-and-pop services like the local nail salon. Riley said such small operations, which are most vulnerable to economic downturns, pose the biggest risks to gift card holders.
In Sharper Image's case, Brookstone is accepting their gift cards, but consumers can also sell or trade cards online at places like Cardavenue.com.

If you own a gift card, the bottom line is this - get rid of it before you lose out completely. And if you plan on giving someone a gift, consider cash or a check.

(Cross-posted at BFM)

5 comments:

Lew Scannon said...

This seems like some sort of scam to me, collect money, give out cards, spend money on lavish bonuses for all the CEOs and then declare bankruptcy, and refuse to exchange cards for merchandise as per the agreement under which the cards were sold. Good thing we're not in a recession or anything.(Or so the Presnit says)

K. said...

Incredible. This amounts to giving money to Sharper Image. It has class action suit written all over, although no doubt SharpIm can seek protection in bankruptcy laws now denied to individuals. And they wonder why people get cynical...

abi said...

I guess the way the store sees it, a gift card is your gift to them.

Catherine Morgan said...

I wanted you to know, that I nominated you for Women's Voices Making History. Your blog is on my list of over 300 women blogging about politics, and I am currently going through it, and nominating blogs that I think are most worthy. Anyone can nominate a blogger, so if you have others you would like to nominate, all you have to do is go to the site at Women's Voices, Women Vote. :-)

Best,

Catherine

Kathy said...

Lew, the president says we're not in a recession because the man is in denial.

K, the way the bankruptcy laws are now written, gift card holders can file a claim against the company, but all other creditors will come first. That means in all likelihood there won't be money left to distribute to gift card holders.

Abi, it sure will make me think twice before I buy a gift card in the future. I'll give my kids cash, which means retailers may lose out since they might use the money to pay their cable bill, etc.

Catherine, thank you so much for the nomination. I don't know that I'm making history, but it's nice to be recognized. I'll visit the site and consider making a nomination too. Thanks again.