The Home Depot earlier this month claimed $43 million in revenues from unused gift cards that it sold from 1998 to 2001.
“We have never reported breakage before, so this was just catching up. The amount sounds large, but it covers a four-year period,” said Home Depot spokesperson Paula Smith.
Home Depot calculated the $43 million in “breakage”—unredeemed value of cards sold—by analyzing historical redemption patterns and tallying the remaining balance of outstanding gift cards that are unlikely to be redeemed. But the cards have no expiration date or service fees, and cardholders can redeem their gift cards at any time.
“Our breakage reporting will never affect a customer that has an unused gift card,” Smith said. “If there is a remaining balance on the card, the customer will always be able to use that card and be assured that the money is there and available for them to use in our stores.”
In the future, Atlanta-based Home Depot will regularly report gift-card breakage to the SEC “when it makes sense to do so,” Smith said, but no timetable has been set.
The Home Depot occasionally uses gift cards in promotions. Two current online efforts offer a gift card with purchase: Shoppers can get a $100 Home Depot gift card with the purchase of a RubberMaid BigMax Shed, and a $20 gift card via mail-in rebate with a qualifying purchase of Price Pfister hardware.
About 12% of gift card value is never spent, according to research firm TowerGroup, Needham, MA. That will be about $5.7 billion in the U.S. this year, up from more than $4 billion in 2002, per TowerGroup.
Sales of retailers’ gift cards will reach $47.5 billion this year; $50.8 billion in 2006; and top $57 billion in 2008, TowerGroup projects.
Network
