People walk past the Gap store on Fifth Avenue in New York. [Agencies]

"With the credit crunch, we don't know if they'll be in business in the next couple of months," said Smith, 34, a risk-management analyst at an energy company in New York.

He's one of a growing number of people concerned that store closings will prevent gift-card redemptions at chains such as Circuit City Stores Inc, which filed for Chapter 11 protection on Nov 10 and has closed 155 outlets. AnnTaylor Stores Corp, Gap Inc and Talbots Inc are also among retailers shutting down some locations.

"We've only just begun in terms of the bankruptcies and liquidation," Howard Davidowitz, chairman of retail consulting and investment-banking firm Davidowitz & Associates Inc in New York, said. "And there's almost no retailer out there not closing stores."

Spending on holiday gift cards in the US may fall 5.3 percent to $24.9 billion this year, while overall sales increase, according to the National Retail Federation trade group. Gift-card sales growth slowed to 5.8 percent last year from 34 percent in 2006, according to NRF data.

People can buy, sell or trade gift cards at http://www.plasticjungle.com, for as much as 40 percent less than face value. The site's traffic has risen in the last two months, said Marc Gendron, the site's vice president of marketing.

Talbots and Michaels Stores Inc are among merchants whose cards trade most on the site. A Talbots gift card with a value of $800.30 is on sale for $500. A $206.46 Michaels gift card is being offered for $151.

Michaels is "committed to our gift-card program", and is seeking ways to expand distribution, Chief Marketing Officer Stuart Aitken said.

Circuit City cards go quickly, Gendron said. Almost 60 were sold at the start of December, he said.

"We don't know what the future holds for Circuit City, but because they're in bankruptcy proceedings, we recommend that consumers use their gift cards quickly," Gendron said.

Circuit City, the second-largest US electronics retailer, has 567 stores still open. The Richmond, Virginia-based company is reorganizing, said spokesman Jim Babb. It is still selling gift cards, he said.

"We want American consumers to know they can have confidence in our gift cards," Circuit City Chief Financial Officer Bruce Besanko said in an e-mailed statement. "There's a lot of misinformation and mistrust being spread."

Default rate

"The default rate is going to go up and the bankruptcy rate will increase," Edward Henderson, a senior analyst at Moody's Investors Service, said yesterday in an interview on Bloomberg Television. "It will start in January."

Mary Delk, the director of Deloitte Consulting, agreed.

"Cash is going to be king next year, and if a retailer doesn't have cash and has got debt to pay off, I think you may see a few more move into Chapter 11, or at worst, Chapter 7" liquidation, she said.

While more retailers will probably close stores or file for bankruptcy, many will probably still honor their gift cards as long as they are not liquidating, said Dave Sievers, head of the retail practice at Stamford, Connecticut-based Archstone Consulting LLC.

AnnTaylor, based in New York, e-mailed customers and Talbots posted a letter on its websites last month telling shoppers that they won't shut all their stores in response to an e-mail that circulated warning consumers not to buy their gift cards.

"Some of the e-mails that I've seen seem to be over the top," said Judie Rinearson, a banking and electronic-payments specialist at law firm Bryan Cave LLP in New York. "Times are hard enough as it is without trying to spook everybody's customers."

AnnTaylor is a "financially strong company", and gift cards remain a "popular and great option", the retailer said in response to the e-mail. Talbots told customers they can "feel confident purchasing and redeeming gift cards" during the holiday season.

Forty-six percent of consumers say they will buy fewer gift cards this holiday season because they fear that companies could go into bankruptcy and not honor the cards, according to a November survey conducted by America's Research Group and UBS AG.

AnnTaylor said in November it is closing about 60 of its 966 stores and opening 66 in fiscal 2008.

Gap, based in San Francisco, is closing 115 stores this year and opening 100, according to Louise Callagy, a spokeswoman.

Its gift cards don't expire and can be used at any of the company's 3,100 stores or online, she said.

Talbots said last month it is pursuing the sale of its 282 J. Jill-brand stores. Talbots closed 100 locations in 2008, including 17 Talbots-brand stores, according to Julie Lorigan, a spokeswoman.