RECENT POSTS
Friday, March 22, 2019
Our New Master Class Video

Thursday, March 21, 2019
Tech Data’s Goodwill Adjustment

Tuesday, March 19, 2019
There’s Taxes, and There’s Taxes

Saturday, March 16, 2019
Adventures in Tax Cuts and Net Income

Monday, March 11, 2019
Big Moves in Goodwill, Intangible Value

Friday, March 8, 2019
CVS, Goodwill, and Enterprise Value

Thursday, February 28, 2019
Summary of Our Goodwill Research/ How-To

Wednesday, February 27, 2019
What Does ‘Other’ Mean? An Example

Thursday, February 21, 2019
Another Tale, Buried in the Footnotes

Wednesday, February 13, 2019
Low Latency Calcbench

Monday, February 11, 2019
Now Streaming on Hulu: Red Ink

Thursday, February 7, 2019
Early Look at 2018 Tax Decline

Wednesday, February 6, 2019
You Revised WHAT, Netflix?

Thursday, January 31, 2019
Talking About Huawei Exposure

Wednesday, January 30, 2019
Another Discrepancy in Reported Numbers

Wednesday, January 30, 2019
Finding Revised Facts: Hertz Edition

Wednesday, January 23, 2019
GE Commercial Aviation Services: Bringing Numbers to Light

Monday, January 21, 2019
Differences in Earnings Releases and 10-Ks

Wednesday, January 16, 2019
The Importance of Textual Analysis

Tuesday, January 8, 2019
A Look at Climate Change Disclosures

Archive  |  Search:

From time to time Calcbench likes to delve into obscure data, and this month we turn our curiosity to the retail sector—specifically, revenue from unspent gift cards.

“Breakage fees” are the revenue that retailers get to keep when you don’t spend the full amount on your gift card. That is, someone gives you a $10 gift card to Starbucks, you spend $8.91 on a latte and coffee cake, and forget about the $1.09 that still remains unspent on that card.

Once the card expires, that $1.09 reverts back to Starbucks as breakage fee revenue. Individually, those unspent cards might seem like small money. Extrapolate them out to the whole retail world, however, and it starts to add up.

Add up to how much, exactly? We dove into our Data Query Tool, and looked at breakage fees reported by retailers for 2011 through 2016. The numbers look like this:

That is, breakage fees grew 27.1 percent over this six-year period, from $305.3 million in 2011 to $388 million in 2016 (and that total may yet rise, if any straggling retailers haven’t filed their 2016 annual reports yet).

Average breakage fee revenue per filer grew by 27.1 percent, from $5.17 million in 2011 to $6.57 million last year.

The revenues from your misplaced cards, however, are only half the story. Retailers can only recognize breakage fee revenue after a gift card expires. Before the card expires, they must still carry that unspent money as an accrued liability. And because the total amount of money on gift cards is generally much larger than the spare money we never spend, those liabilities accrue into the billions. Again, let’s look at the data:

Total accrued liabilities shot up 70.2 percent over the six years, from $5.32 billion in 2011 to $9.05 billion in 2016. Average accrued liabilities per filer rose 62.6 percent, from $61.2 million to $99.5 million over the same period.

Another quirk worth noting: while these numbers are going up, the total number of filers reporting these numbers is falling. For example, 115 companies reported accrued liabilities related to gift cards in 2013—and only 98 in 2015, down to 91 last year. Likewise, 81 filers reported breakage fee revenue in 2013, which dropped to 69 in 2015, and only 59 last year.

Again, those 2016 numbers might edge up in coming months as a few late filers toss their numbers into the databases. But brick-and-mortar retailers are reeling these days, as Internet retailers eat their lunches. This could be a sign of that.

Then again, perhaps not—the true answer can only be found one company at a time. For financial analysts following the sector, however, it’s a question you might want to pose on that next earnings call.


FREE Calcbench Premium
Two Week Trial

Research Financial & Accounting Data Like Never Before. More features and try our Excel add-in. Sign up now to try the Premium Suite.