For Dealers, Gift Cards Are The Gift That Keeps On Giving

By Alan Wolf -- TWICE, 12/28/2006

New York — Thanks to gift returns and post-Christmas sales, the holidays ain’t over ‘til they’re over.

Also affirming the Yogi Berra adage is the increased popularity of gift cards, and the post-holiday redemptions that push the season well into January for CE dealers.

The National Retail Federation estimated that holiday shoppers bought $24.8 billion worth of cards this quarter, up 34 percent from the prior year, while Goldman Sachs analysts expected sales to double as retailers pushed them more aggressively.

Indeed, dealers are enamored of the plastic, which generates generous attachment sales and provides an added windfall if not redeemed. According to Circuit City chief financial officer Mike Foss, the company’s gift card sales were up 55 percent from September through November and were ahead 40 percent year-to-date through Dec. 18. “They will have some benefit in the [fiscal] fourth quarter,” he told analysts earlier this month.

For Best Buy, gift card sales were up double digits for the same period and were on track to grow 15 percent to 16 percent for the full year to well over $1.1 billion in 2006, according to chief financial officer Darren Jackson.

What’s more, Best Buy’s customers spend twice the face value of their cards on average, Jackson said — assuming that they’re used. Analysts estimated that about 6 percent or $4.8 billion of last year’s gift cards will remain unredeemed, while Consumer Reports says that 19 percent of gift cards went unused in 2005 due to loss or expiration.