I don't buy it. They wouldn't sell something that loses them money because it's not enough of a traffic driver to do so. They constantly have gift card promotions for a reason. They're winning somehow.
I think retailers get the gift cards at a discount, say 5-10% off. And they probably get the purchase fee too.
The issuer/bank also makes money on each swipe with the gift card later, so Visa/MC/Amex will make money when you actually use the gift card via interchange fees. Ironically, the issuers should also make money if you purchase the GCs with a cc.
The store gift cards don't have any fees because they assume the cardholders won't use the full value or will spend more at the store than they normally would. So they can offer discounted cards to retailers on that basis.
Everyone is making money.