Saturday, May 03, 2008

Gift Cards Frozen

An AP story reported that Linens 'n Things is filing for Chapter 11 bankrupcy and will be closing 120 stores, about 30 of which are in California. A sidenote is that $42M in giftcards will be frozen, affecting 400,000 consumers. Consumers tend to think of gift cards as cash, but they are actually debt for the company. Payment was already received for future purchases, so the company technically "owes" in the form of merchandise. The lesson is to be wary of gift cards from shaky retailers.

The company has been in dire straits for a while and many have criticized their heavy use of sales promotions with coupons over the years.

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