Gift Cards - Responsible for Slow Retailer Sales?

Some retailers are pointing to revenue recognition of increased gift card sales as one reason this holiday season's same store sales results may be lighter than expected.

Sales of gift cards now represent about 8% to 10% of holiday retail spending, analysts estimate. But such spending can skew retailers' holiday results. Although consumers often purchase gift cards in December, retailers don't recognize revenue from such cards until they are redeemed, which often occurs weeks or months after Christmas.

"Gift cards really don't affect total sales," said Craig Johnson, president of retail consulting firm Customer Growth Strategies. "But they dramatically affect [same-store] sales," which seem unlikely to produce the kind of gains many investors were betting on this holiday season.