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Earnings Drop 62% at Sharper Image

The specialty retailer is suffering a sales slump. CEO's job may be at risk.

April 18, 2006|From the Associated Press

SAN FRANCISCO — Sharper Image Corp.'s quarterly profit plunged 62% as the retailer of high-tech gadgets and offbeat merchandise continued to struggle to overcome a sales funk that has provoked a shareholder rebellion.

The San Francisco-based company said Monday that it earned $6.3 million, or 42 cents a share, for its fiscal fourth quarter ended in January. That compared with net income of $16.4 million, or $1.01, for the same period last year.

Revenue totaled $263.7 million, a 12% decrease from $301 million a year earlier. The earnings fell a penny below the average estimate of analysts surveyed by Thomson Financial.

Sharper Image released the results after the stock market closed. Its shares dropped 36 cents to $12.75 in regular trading and then regained 27 cents in extended trading after Chairman Richard Thalheimer predicted that new products would revive sales at the 190-store chain this year.

The latest quarter culminated a weak year for Sharper Image. The company lost $15.6 million, or $1.03 a share, during fiscal 2005, coming off a profit of $14.7 million, or 90 cents, the previous year. Revenue for the year fell 12% to $669 million.

It marked Sharper Image's first annual loss since 1990 and illuminated why Thalheimer's job is threatened by Knightspoint Group, a rebel flank controlling 12.8% of the company.

Knightspoint wants to replace Sharper Image's seven-member board with a slate that includes veteran executives and retailing consultants. Firebrand Partners, another unhappy shareholder with a 5.4% stake, has indicated that it might support Knightspoint's mutiny.

If it wrests control of Sharper Image's board, Knightspoint has indicated that it will oust Thalheimer as chief executive and replace him with Jerry W. Levin, who ran Revlon Inc., Sunbeam Corp. and Coleman Co.

Knightspoint's challenge could culminate in a showdown at Sharper Image's annual shareholder meeting, which is usually held in June. The company has yet to set a date for this year's meeting.

Sharper Image said Monday that it had asked for a 15-day extension to file its annual shareholder report, attributing the delay to recent departures in its accounting department. Management assured investors that the filing would not include major revisions to the financial data released Monday.

Thalheimer, who founded Sharper Image 29 years ago and remains the company's largest individual shareholder, is betting that dramatic cost cutting and interesting new products will produce better financial results this year. He blamed the past year's downturn on the declining popularity of Sharper Image's air purifiers and massage chairs.

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