An unexpected side effect of The Sharper Image bankruptcy: gift cards are not being accepted for payment anymore. Although the Consumerist points out that you can sue for compensation under bankruptcy law, I'm kinda shocked.Chapter 11 allows a company to reorganize, granting temporary relief from debt to emerge slimmed down, leaner, and more competitive. TSI is closing over half of their stores, allowing them to escape long term leases and layoff employees; that's cost savings. If they can get relief from the looming Ionic Breeze judgment, those two moves alone will provide the chance to actually make a go of it.
This one I don't understand: the gift cards represent actual cash that has been paid to the company by consumers, not a promise of cash. If a supplier sells TSI gizmos, they get paid on a net 30 or 60 basis; TSI can hold back that money, and the supplier is screwed: the gizmos are in TSI stores, and the supplier has to get in line with everyone else to get paid. But the gift card holder? No way: that's actual cash.
I think back to Chapter 11's like United Airlines. In those, key executives were given raises or bonuses to ensure they stayed, as the bankruptcy court felt that the company had a better chance of competing and exiting bankruptcy with those people on board. In this case, the only way TSI exits chapter 11 is if they reduce costs while maintaining sales; if consumers can't purchase, that directly damages those prospects, and they are looking at Chapter 7 instead.
I think this might be a result of the initial chaos around the problem, and will be a temporary condition, at best. If not, get ready for the latest Gordon Brothers acquisition.
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