Loehmann’s Doesn’t Plan to Honor Store Credits

Judge Martin Glenn said it best during Loehmann’s first bankruptcy hearing Monday: “The headline oughta be that anyone holding a store credit better rush to the store and spend it because after the sale hearing, all bets are off.”

That’s right: Loehmann’s doesn’t plan to honor store credits from returned items and is leaving customers less than a month to spend the credits. Once going-out-of-business sales start, the credits will be worthless.

As part of its recently filed Chapter 11 case, Loehmann’s is selling the right to hold these liquidation sales at its 39 locations in early January, with sales to start around Jan. 13.  Once those sales begin, the company said during its first bankruptcy-court appearance Monday, the credits won’t be honored.

On the other hand, Loehmann’s has agreed to honor outstanding gift cards during the liquidation sales.

As part of the contract it has with the liquidator, which will be tested at auction, Loehmann’s receives roughly 75% of the amount generated during the sales. The liquidators receive the other 25%. However, Loehmann’s must reimburse the full cost to liquidators of whatever gift cards or store credits are honored during the sales.

It wasn’t totally clear at the hearing why Loehmann’s was deciding to honor one but not the other, other than that its would be a greater chunk out of its sales. The store could change its mind.

Judge Glenn said that Loehmann’s must provide him with the number of customers holding store credits and in what amount.

This isn’t Judge Glenn’s first time dealing with this issue, either. In Borders’s Chapter 11 case, gift cards became a major issue, which is still being litigated in circuit court.

Write to Stephanie Gleason at [email protected]. Follow her on Twitter at @stephgleason.