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Walmart pledges $1 million for tornado relief

BY CSA STAFF

Bentonville, Ark. — Walmart announced that through its charitable arm, the Walmart Foundation, it is committing $1 million in cash and in-kind donations to support emergency relief efforts following the recent Southern storms, Midwest floods and Texas wildfires.

"Our thoughts are with those who have been impacted by the storms, tornados, floods and fires that have devastated many communities across the country. We have been in touch with emergency responders and are making sure essential items like food and water are available to those in distress," said Rosalind Brewer, executive vice president, Walmart East, Walmart U.S. "Our company has a longstanding commitment to helping in times of disaster. We will continue to monitor the situation to help ensure essential needs of all impacted communities are being met."

In addition to monetary contributions, the company’s donations will include critical supplies like water, food and first-aid kits delivered to organizations providing disaster relief in Alabama, Arkansas, Georgia, Illinois, Iowa, Kentucky, Louisiana, Mississippi, Missouri, North Carolina, Oklahoma, Tennessee, Texas and Virginia.

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Gift Cards: Opportunity and issues for retailers

By Giles Sutton and Mark Wuller, [email protected], [email protected]

The growth of gift cards has been nothing less than phenomenal. But while gift cards have come to provide a critical source of earnings, they also face an intensifying regulatory environment, including tax and financial reporting for gift cards, that has become increasingly complex.

According to the National Retail Federation (NRF), gift cards are the most popular holiday gift request for four years running. According to the NRF research, 77.3% of shoppers were likely to purchase one or more gift cards during the 2010 holiday season. Another survey by BIGresearch, predicted that total spending on gift cards during 2010 would reach $24.78 billion — a hefty sum — that translates to average amounts of $41.48 per gift card (up from $39.80 in 2009) and $145.61 in total purchases of gift cards (up from $139.91 in 2009). Among the popular destinations for those planning to purchase gift cards were department stores (39.2%), bookstores (23.7%) and electronics stores (19%).

Others expected to buy gift cards from restaurants (33.4%) and coffee shops (13.9%). Still others planned gift card purchases at entertainment venues such as movie theaters (14.1%). Many holiday shoppers (45.8%) purchased gift cards so that recipients could choose their own gifts. Convenience was a consideration for 17.8% of shoppers choosing gift cards.

Dining is high on the list for many consumers purchasing gift cards. Analysis conducted by First Data shows that from January through June 2010, quick-service restaurants posted a 14% increase from H1 2009 levels in the dollar values of gift cards sold, while casual-dining restaurants enjoyed a 6.1% increase from H1 2009 levels in the number of gift cards sold. Several factors contribute to the growing popularity of gift cards among quick-service restaurants. QSR magazine notes that many consumers are looking for value pricing, especially given the recession. Loyalty programs account for another portion of the growth. And during 2010, many quick-serves, in a bid to market themselves to entities that conduct fundraising activities, sold gift cards in bulk.

The emerging trend in gift cards is found on your smart phone. With electronic or virtual gift cards and mobile applications that allow consumers to purchase and redeem gift cards from their mobile/smart phones, sales only continue to grow. While consumers flock to them for their flexibility, businesses have embraced them as a means to increase sales. Not only are buyers spurred to make new purchases, but they often spend more than the gift card amount. Gift cards can be instrumental to improving a retailer’s cash flow and managing inventory. Perhaps the greatest benefit to retailers is that a sizable number of consumer gift card purchases are never redeemed. Estimates of the percentage of gift card balances that remain unredeemed — otherwise known as breakage — range from 10% to 19%.

But as gift card sales continue to surge, financial executives in the retail industry must carefully keep track of ever changing tax, regulatory and financial reporting that can affect their bottom line. There is an uptick in scrutiny and regulation, especially within the past year. For consumers, there is increased protection under Title IV of the Credit Card Accountability, Responsibility and Disclosure Act of 2009 (CARD Act), which went into effect in early 2010. The CARD Act restricts gift card issuers from charging fees on cards for 12 months and extends card expiration until five years after purchase. In addition, the Federal Reserve Board (FRB) and the IRS have recently issued new rules for companies with gift card programs, providing much-needed guidance.

Key issues for retailers to consider include:

State tax nexus issues for retailers: For gift card issuers to be subject to state taxation, the issuer must have nexus — a physical or economic presence sufficient to establish jurisdiction to tax — in that state. It is important for companies to understand what establishes nexus in the various states in which their gift cards are sold, since each state’s rules differ.

State escheat rules: The increasing popularity of gift cards also makes the management of escheat, or unclaimed property, liabilities an important issue. All U.S. states and the District of Columbia, as well as Puerto Rico, Guam, the U.S. Virgin Islands and certain other foreign jurisdictions, have explicit unclaimed property reporting requirements. Unclaimed property liability is not a tax, but rather a liability under state succession laws relating to property rights.

Breakage and GAAP accounting: Retailers routinely sell gift cards to individuals with the expectation that a certain portion of these cards will never be used, called “breakage,” which mostly results from lost cards. Gift card breakage has certain accounting and state escheat implications, since it affects income recognition. These unredeemed dollars can have a significant influence on many companies’ bottom lines. If the card does not fall under specific state escheat rules, the question arises as to when companies can recognize income from breakage for financial statement purposes under GAAP.

The popularity of gift cards shows no sign of abating and will likely continue to grow as more consumers begin to use gift cards via convenient new mobile applications and to enjoy heightened consumer protections under the CARD Act. The benefits to gift card issuers remain numerous: increased sales, improved inventory management, better cash flow and higher profitability. While there is also more scrutiny of gift cards from the IRS and the FRB, the new rules mean more clarity for gift card issuers with respect to federal tax accounting rules and the financial accounting treatment of advance payments. While many companies have done a significant amount of work in the past to ensure that they are able to recognize gift card breakage income, companies must continue to evaluate and monitor the legislative changes in the various states in which they operate. The last thing retailers want is to have a financial restatement that is due to lack of awareness of changes in state.

Charlotte-based Giles Sutton is a state and local tax partner and the national retail tax practice leader for the global accounting firm Grant Thornton. He can be reached at [email protected].

St. Louis-based Mark Wuller is an audit partner and the national retail practice leader for the global accounting firm Grant Thornton. He can be reached at [email protected].

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williamson says:
Mar-30-2013 09:35 am

Credit Card Accountability, Responsibility and Disclosure Act of 2009 (CARD Act), which went into effect in early 2010. The CARD Act restricts gift card Health here issuers from charging fees on cards for 12 months and extends card expiration until five years after purchase. In addition, the Federal Reserve Board (FRB) and the IRS have recently issued new rules for companies with gift card programs, providing much-needed guidance.

williamson says:
Mar-30-2013 09:35 am

Credit Card Accountability, Responsibility and Disclosure Act of 2009 (CARD Act), which went into effect in early 2010. The CARD Act restricts gift card Health here issuers from charging fees on cards for 12 months and extends card expiration until five years after purchase. In addition, the Federal Reserve Board (FRB) and the IRS have recently issued new rules for companies with gift card programs, providing much-needed guidance.

B.Low says:
Jan-03-2013 05:15 am

Potong Pasir New Launch Sant Ritz is a new and upcoming condominium located in the Potong Pasir area, within a short drive to Little India, Orchard and city area. With expected completion in mid 2016, Sant Ritz comprises of 3 towers with 214 units and stands 12 storeys tall. Future residents will be able to walk to the existing Potong Pasir MRT. With such a short drive to the city area as well as the orchard and bugis area. Entertainment for your love ones will come at a stone’s throw away

B.Low says:
Jan-03-2013 05:15 am

Potong Pasir New Launch Sant Ritz is a new and upcoming condominium located in the Potong Pasir area, within a short drive to Little India, Orchard and city area. With expected completion in mid 2016, Sant Ritz comprises of 3 towers with 214 units and stands 12 storeys tall. Future residents will be able to walk to the existing Potong Pasir MRT. With such a short drive to the city area as well as the orchard and bugis area. Entertainment for your love ones will come at a stone’s throw away

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Baby Boom…or Bust?

BY Jeff Green

In case you missed it because you were too busy putting away the noisemakers or watching college football, the first day of 2011 was not just another New Year’s Day. It was a significant generational milestone: The first members of the Baby Boom generation turned 65.

If you’re a retailer, you certainly understand the significance of this milestone; this influential group of around 77 million, both literally and figuratively, controls the purse strings. Baby Boomers now control more than 80% of personal financial assets in the United States and are responsible for around half of all consumer spending. Did you know that spending by consumers over the age of 50 has gone up 45% just in the last decade, while spending by the under-50 crowd has only increased by 6%? That’s a big difference!

I’ve been thinking about this a lot and have found myself asking the question: Why have so many retailers geared toward such a promising demographic not performed well? Because the reality is that women’s fashion in particular — Talbots, J. Jill, Orchard Brands — have all struggled. I think the issue is style — or lack thereof. In my opinion, this is a demographic that has not been particularly well-served in terms of fashion or styling. Over-50 doesn’t have to mean conservative, dowdy or frumpy. The inability of certain retailers to understand that has been problematic.

From a retail real estate perspective, I think the current challenges in this sector will actually be good in the long run. It is a sector in transition right now, especially for apparel retailers. Teen apparel retailers can simply move on to the next generation of teenagers, but Boomer-focused retailers have to deal with the same aging customer base whose style, taste and preferences are changing over time. Some designer brands are doing well, but some big names have really floundered. I think we’re likely to see some of the more successful designers expanding their store base and/or even generating new store formats, while others will likely have more closings in the immediate future. The good news about those closings is that it will free up some real estate for new concepts, and hopefully those new concepts will be able to do a better job of understanding the Boomer customer.

To me, it’s actually a good thing that those who couldn’t keep up with fashion and sizing have fallen back. It’s allowed those who have been more adaptive to prosper. In the same way that a tree falling in the forest opens up a sunlit gap in the canopy for aspiring newcomers, lean times in retail can prompt big moves forward. I think that once this sector perks back up, we’ll see a lot of those “newcomers” wanting in. Boomers are shopping with minimal alternatives right now; imagine the dollars they would spend if they had better options!

I’ll leave you with one last Boomer factoid to ponder: When the last of the baby boomers turn 65 in 2030, the percentage of the population that is 65 or older will have grown from 13% to 18%. Makes me wonder how apparel retail will be doing then.

What do you think? Email me at [email protected].

Jeff Green is president and CEO of Phoenix-based Jeff Green Partners (jeffgreenpartners.com), a leading consulting firm specializing in retail real estate feasibility, retail expansion planning, medical retail planning, location analysis and commercial land use.

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