Sour outlook for holiday gift cards

NEW YORK (AP) - Gift card sales, which took a hit last year, are not expected to revive this holiday season as shoppers stretch their budgets by buying at deep discounts.

Brian Riley, senior analyst at research firm The Tower Group, predicts a 7 percent drop in gift card sales from a year ago. He said lean inventories will also hurt gift card sales because they will make shoppers nervous there will be nothing for recipients to buy once they have the cards.

"This is a bad sign for the holiday season," Riley said. "Gift cards give retailers a captive audience."

Consumers surveyed by BIGResearch for the National Retail Federation said they will spend slightly less on gift cards this holiday season, an average of $139.10, compared with $147.33 last year. The average card will be worth $39.80, compared with $40.54 in 2008, according to the survey.

Shoppers said their main objection is that the cards are impersonal. But they also want to take advantage of deals retailers are offering on purchases and they're worried about expiration dates or fees. A smaller percentage said they fear a retailer might go out of business.

On average, chief marketing officers at top U.S. retailers expect gift card sales to account for just 5 percent of holiday sales, down from nearly 12 percent in 2008, according to a survey conducted by accounting and consulting company BDO Seidman LLP.