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5 Gift Cards to Avoid for Holiday Shopping

Sears (SHLD)
A Sears gift card a bad investment? How could an item from the store whose catalog was the discount store for much of rural America and whose houses still dot the landscape be a bad gift?

Because it's not the early 20th century anymore, and Sears hasn't adapted well to that fact. Total revenue for Sears Holdings dropped $113 million in the third quarter compared with the same period last year, while revenue year-to-date has dropped more than $570 million from the first nine months of last year. Its third-quarter net loss of $215 million in 2009 more than doubled to $425 million during the past three months. It's more than tripled year-to-date to $743 million from $232 million.

If Sears' merger with Kmart was supposed to help it compete with Wal-Mart (WMT - Get Report), Target (TGT - Get Report), Kohl's (KSS - Get Report) and the rest of the discount sector, those competitors should fill Sears' mailboxes in Hoffman Estates, Ill., with holiday thank you cards for taking that plan in the exact opposite direction. Sears' share price has plummeted more than 61% during the past five years and sales at Kmart for the first nine months of the year are off $148 from last year, while Sears sales dropped by $391 million during that span.

Sears hasn't exactly helped itself by allowing its cherished Craftsman line of tool products to be sold at Ace Hardware and Costco( COST - Get Report ) stores or by using its Web site as a sprawling, baffling marketplace that's continually one-upped by Amazon (AMZN - Get Report).

If none of that makes a Sears gift card a bad buy this season, the fact that it'll be a de facto Kmart gift card in the near future should. Sears stores' operating losses are six times those of their Kmart cohorts. The company may have three fewer Kmart stores than it did during the first nine months of last year, but it has shed 26 of its full-line Sears stores in the past year in favor of "specialty" Sears Outlet and Hometown stores.

It hasn't stopped the bleeding and only reinforces the fact that Sears as consumers know it is fading away. Unless you're willing to trade Kenmore stoves for Blue Light Specials sometime soon, the Sears gift card should be a last resort.

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