The Observation Deck

Jim O'Bryan wrote: Joe gift cards are paid for at the time of purchase. Companies make more profit when people do not use them. The boost the news speaks of is when I take back one gift and buy somewhere else or take Grandma's dollar in the envelope off to buy something. the projection is dismal

Jim,

I had to wait a month for the January sales figures to come out. As I write this, the stock market today is up about 100 points. The are up in large part, according to many news sources, due to strong January sales.
These sales, the reports say in bloomberg.com, CNN money.com, and other sites that the high retail sales are due in part to high redemption of gift card sales during the Christmas season:
" Higher energy prices failed to limit spending at general merchandise and clothing and accessory stores, where consumers cashed in gift cards received during the Christmas holiday and took advantage of warmer weather. Sales at general merchandise stores including department stores rose 2.1 percent last month, the most since May 2004." - bloomberg.com

You see, Jim, when a store sells a gift card, it isn't automatically considered a purchase as you believe. Go to any website that reports about financial subjects and you'll see the same story today. I'm sure even the PBS news hour and market watch will consider discussing this today, as the Dow has climbed from up 100 points to up 120 points up since I began this message.

I'm sure you'll find some way to spin this, but gift cards are not counted as sales when purchased as you implied.

Joe

That is correct - they are actually a liability to the firm that issued it until they are redeemed. If they are not redeemed after a specified period then they are posted to income at the time of expiration.

To that end, there is recent legislation that has extended the minimum period of time that an establishment has to provide for the redemption of gift cards/certificates.

Peace,
~Charyn

Charyn Varkonyi wrote:That is correct - they are actually a liability to the firm that issued it until they are redeemed. If they are not redeemed after a specified period then they are posted to income at the time of expiration.

Thanks for backing me up here, Charyn.
I tried to explain that December's retail figures did not take into account the huge amount of gift card purchases this past year. He tried to tell me that gift cards were counted as they were being sold, not redeemed.
Today's reports show just how much of an impact they make.

Joe

Joseph Milan wrote:

Charyn Varkonyi wrote:That is correct - they are actually a liability to the firm that issued it until they are redeemed. If they are not redeemed after a specified period then they are posted to income at the time of expiration.

Thanks for backing me up here, Charyn.
I tried to explain that December's retail figures did not take into account the huge amount of gift card purchases this past year. He tried to tell me that gift cards were counted as they were being sold, not redeemed.
Today's reports show just how much of an impact they make.

Joe

Well thank you both, I guess the news is better.


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So basically, on paper it LOOKS like people are out spending more money, but in reality, NO new money is coming in.

The stores had the money in their hands in December, now they have to fork over some goods.


I should be happy sales in January are so strong? Yeah, right.

Grace O'Malley wrote:So basically, on paper it LOOKS like people are out spending more money, but in reality, NO new money is coming in.

The stores had the money in their hands in December, now they have to fork over some goods.


I should be happy sales in January are so strong? Yeah, right.

Not exactly. What it means is that sales, rather than being concentrated in December, were spread out over Dec. and Jan. Traditional December sales were up, although not dramatically, over 2004. Add the January
sales/card redemptions, and you have a strong season
To put it another way, without the gift cards, yes, January would not have looked as strong. But DECEMBER would have been stronger than it was.
While stores "had the money in their hands in December" they couldn't claim it as "sales" or revenue. You can't count a sale until product is actually moved from your inventory. The redemption is when the "transaction" finally takes place.
If you had claimed gift card sales as revenue in Dec, you would have then had to claim a massive corresponding "loss" in January.
I have a little retail stock. I'm happy.!

Jim O'Bryan wrote:
Well thank you both, I guess the news is better.

That's all you have to offer after saying how dismal the Christmas shopping sales were and saying I was wrong about the impact of gift cards?
As long as we're correcting things, there's another item that needs to be looked at. You discounted an idea of having a regional airport in a previous thread that could bring new jobs to the area. Even with some traditional airlines in trouble, the Dow's tranportation index, an index of stocks for everything from trains, trucks to airlines, even with high fuel expences, hit a record high today. Perhaps you'll start protesting low cost airlines saying they are what Wal-mart is to the retail industry, but today's numbers show that a regional airport with transportation of goods is not something that can be ignored based on what one or two airline companies are doing.

Joe