Circuit City puts itself up for sale
May 09, 2008 in Bankruptcy & Gift Cards, General |
According to a story on Bloomberg News this morning, struggling retailer Circuit City has decided to put itself up for sale. The company is opening its books to Blockbuster and other investors interested in an acquisition. If you recall, i posted a story last week about rumors of the company being on the verge of bankruptcy, which turn out to be untrue.
What does this mean for gift card holders? This is a bit of good news since any effort to keep the company alive means gifts cards will continue to be redeemed. However, as I have mentioned before, if you have a Circuit City gift card, now is the time to use it. Also, I do not recommend buying a Circuit City gift card until the company’s future is clear.
- Press My Buttons !
Mr. GiftCardBlooger,
I wanted to raise an issue about this post and some other recent ones. I am a bankruptcy attorney, so I know a little bit about this area. First, just because a retailer files a voluntary petition for Chapter XI Bankruptcy does not mean that they will no longer accept gift cards. In actuality, for national retailers who intend to work their way out of this situation, most of them are able to present to the court (who makes the final decision) the need to continue to accept their gift cards.
And, in the case of Circuit City, any company that is going to put itself up for sale will continue to accept their cards. Who would buy a company that has a PR crisis on their hands, which is what they would have if they stopped accepting their gift cards? Their buyer will most likely accept them as well. Any company that would purchase Circuit City and NOT accept their previously-issued gift cards would be stupid. When you are buying a company and the brand name, there is a lot of value in the “Goodwill” and reputation. Declining to honor their gift cards would throw much of that “Goodwill” away.
I just think it is important, just because you have a blog, that you should not “fan the flames” and practice irresponsible journalism. But it is your credibililty on the line.
Kelli Reese, Esq.
Kelli Reese, thanks for stopping by. I appreciate your comments but have to disagree with you on some of the things you said. My goal is not to fan any flames but to educate and inform my readers about gift cards.
I don’t think you have read all my posts concerning circuit city because if you did, you will notice that my first post was about an email that is widely circulating stating that circuit city is on the verge of bankruptcy (this has even forced the company’s PR to issue a statement denying it). I did state that there is no evidence of that.
However, there is no denying that Circuit City is struggling and without a plan to compete better with Best Buy, the company may go under, given the current economic environment. Putting themselves up for sale is an acknowledgement of this and a step in the right direction (in my opinion).
Now, about your comment regarding irresponsible journalism, as stated, my goal is to inform my readers. I do not think buying circuit city gift cards right now is a wise investment when the company’s future is unclear. As you probably know (since you are an attorney), when a company files for bankruptcy, it is not a guarantee that they will continue to redeem gift cards. Customers of The Sharper Image had to learn this the hard way and that is what I want my readers to avoid. At this time, no one knows what is going to happen to Circuit City. The current offer to buy the company may fall through and if the company’s finances turn for the worse, anything is possible. Why should i advise my readers to give an unsecured loan (purchase a gift card) from a company that is struggling?
You missed my point: Sharper Image and Bombay Company have been the two most publicized exceptions. Movie Gallery/Hollywod Video, Hancock Fabrics, Buffet Holdings (Old Country Buffet, Ryans Grill, etc) are each in Chapter XI and each has continuously accepted (and are still selling) their gift cards. You should tell your readers that Chapter XI means the acceptance of gift cards “could be” suspended, but it does not usually mean that.
But go ahead and continue to defend your form of “hack” journalism.
As an attorney and someone who has been involved in the gift card space for a good amount of time, I actually appreciate GiftCardBlogger’s post. Kelli - if you reflect I believe that you will see that his intention is to notify consumers that there is an undeniable risk - regardless of whether you agree with the magnitude - associated with purchasing gift cards from a retailer that is in financial distress. Unfortunately, the average consumer generally does not read a company’s financial reports and may not be aware of the risk associated with their engagement with a retailer until it is too late. So, I dare say that it IS responsible blogging to encourage consumers to be thoughtful about their purchases and to be alert that a situation may be poised to take a turn for the worse. Should you still not agree, take off your attorney hat for a moment, and put yourself in the shoes of a consumer who ends up holding a gift card that has been rendered worthless after being purchased in good faith and with hard earned money.
Kelli Reese, I agree with you that readers should know that Chapter 11 does not always mean a suspension of gift card redemption, and I have stated that to my readers in this article http://www.giftcardblogger.com/gift-card-alert-linens-n-things-going-out-of-business/.
Specifically, I said in the article that “When a company files for Chapter 11 bankruptcy, federal law allows the company to stop honoring gift cards. However, the company may petition the bankruptcy court to continue the redemption of gift cards. My advise is that when buying a gift card, keep your eyes and ears open regarding the company you are buying from. Avoid buying gift cards from companies that are struggling as you may loose your gift card should the company go under”.
I am sure you did not read this article and to jump to conclusion that I am practicing “hack” journalism is not a fair assessment of my work. I have been consistent with the fact that consumers should avoid buying gift cards from companies that are in trouble. Why wait to find out during bankruptcy whether your gift card will be redeemable or not when you can be proactive by avoiding the situation all together?
GiftCardBlogger & Jennifer,
You guys both obviously miss the point. No one is denying these points: 1) Companies that file for bankruptcy CAN have all previously-issued (those gift cards sold prior to the filing) rescinded (actually, holders of those cards have the right to receive any compensation as determined by the bankruptcy court, but they must file a claim and will be about the lowest unsecured creditor to receive payment, which may only amount to pennies for each dollar). 2)It is wise for individuals to consider the financial performance of a retailer before purchasing a gift card, and any recipient of a gift card (from a struggling retailer) should likely be used sooner than later. I, too, appreciate the “advisory” from this web-sites and the other business web-sites I subscribe to.
However, the point I wanted to get across is that in posts on this site and some other gift card sites, the publishers almost make it sound like every company that files for bankruptcy will stop accepting gift cards. This part is totally not true! There are companies like Movie Gallery/Hollywood Video, Hancock Fabrics, Buffet Holdings that are in bankruptcy and have continued to accept gift cards. yes…anyone holding these cards should be advised/forewarned that they should “use it or possibly lose it.” And then to state that Circuit City will be filing for bankruptcy, which so far is totally not true. Could it happen down the road? Anything is possible.
I guess I will turn to other sources who do not practice the “New York Post” style of journalistic ethics (rumors and innuendo). Anyone in a blog can say anything: I can post right here that I think Jennifer and Mark Roberts are sleeping together, but does that make it true?
I would love to have remained engaged in this dialogue, which I thought was quite savvy and thought-provoking, but because my co-participant has decided to devolve into sleazy innuendo directed at me personally, I will respectfully bow out with a final thank you to GiftCardBlogger for his continued aid and information for consumers.
Jennifer, I am sorry you have to bow out of this discussion but i totally understand your reason. I agree that it has been thought provoking. Thanks for your comments and contribution to this discussion.
WOW! Reading this blog trail was beginning to get more interesting than the National Enquirer! I am sorry it had to end so soon!
Everyone had some great points. I used to clerk for a bankruptcy judge when I was going through law school, and each of you is correct. I guess Ms. Reese simply does not like the way it is reported. Oh well! Keep bringing these consumer alerts to our attention. I’m almost to the point where I am going to go back to plain old-fashioned cash: it never expires, there is never a fee, and it can be used anywhere!
There are always two sides to a story. Bottom line is this: Use your gift cards when you get them before you lose them, expire, or the company goes bankrupt. Whatever the case may be, just be careful. Look, this is new territory and the future is unpredictable. Let’s look at companies that did file for bankruptcy that are no longer accepting gift cards ( UTIX and Signature Days). Clearly these companies are no longer in business and won’t be selling any more gift cards. As long as we’re here, let’s look at all the recent airlines that went under. Are the ticket holders going to get refunded? How about all the frequent flier miles that have been accrued? The future is unpredictable and anything is possible.