Chain hopes dads will make it better
Sharper Image Corp.’s website has been counting down the days, hours, minutes and seconds to Father’s Day.
It’s that important -- not necessarily to shoppers, but certainly to Sharper Image.
The purveyor of air purifiers, massage chairs and nose-hair trimmers loves Father’s Day, its second-most-important sales-generating holiday. After losing almost $60 million last year, Sharper Image needs all the sales it can ring up, and Chris Woolley, a soccer coach from Rowland Heights, helped out at its store at Fashion Island in Newport Beach this week.
“I use it more as a gift place than a regular shopping place,” Woolley said as he left the store with a barbecue grill set for his dad and a Warm & Cool Ultima Sleep Pillow for himself. “It tends to be slightly expensive for the everyday person.”
Indeed. In the run-up to Sunday, the retailer pushed a crazy array of pricey devices for Pop. Send him to “gadget nirvana,” it suggested, with a portable global positioning system for $900. Or give him some Trump Steaks -- as in the Donald -- the Connoisseur Collection, maybe, for $999. Or an experience in weightlessness aboard a highflying Boeing 727-200 for $3,675.
That’s a tad more than the $54 the average adult plans to spend on Father’s Day purchases this year, according to a Discover card survey. But Sharper Image has never seen or marketed itself as run-of-the-mill.
It mailed out its first catalog in 1979 and opened its first store in San Francisco, where the company is based, two years later. It boasts 186 stores today. The chain became a retailing phenomenon by offering offbeat items before they became widely available elsewhere. Now it sells a mix that includes travel alarm clocks, robot puppies, neck pillows, can openers and kayaks.
Its Ionic Breeze air purifiers were a huge hit for the company, and by 2004 accounted for 40% of sales. Then competitors began cranking out air purification products too, and Consumer Reports panned the 2005 Ionic Breeze as ineffective.
The next blow was falling sales of Sharper Image massage chairs as less expensive models appeared. This week, Sharper Image’s Ultimate Human Touch Robotic Massage Chair (which says, “Goodbye, have a nice day,” when you get up) was going for $4,799 while Wal-Mart offered one of its pricier versions for $598.
The company hasn’t turned an annual profit since fiscal 2004. Last year, revenue slid 22%. Sales at stores open a year or more have dropped for 31 months in a row. The retailer is the worst performer of the 48 chains monitored by Thomson Financial, said Jharonne Martis, an analyst with the data tracker.
Last month, buyout firm Sun Capital Partners Inc. purchased 1.49 million shares of Sharper Image stock from founder Richard Thalheimer for $13.8 million.
“He sold roughly 95% of his holdings,” said analyst Richard Weinhart of BMO Capital Markets. “Not exactly a sign of confidence.”
There is a turnaround strategy in place. Chairman Jerry W. Levin told analysts last week that the firm was “on track” and laid it out: Lesser-quality goods that are broadly available elsewhere are being eliminated to make way for newer, upscale and exclusive items. By November, he said, about half the products in the stores will be new.
The retailer will stock more products made by other companies. A new division that was set up to license its brand to other retailers and manufacturers inked its first deal with OfficeMax, which will offer a line of Sharper Image office furniture.
To pave the way financially, Sharper Image has increased its available credit to $120 million from $85 million.
“We have a very clear vision for where we want to take Sharper Image,” Levin told analysts, and the “managerial and financial resources to execute that vision.”
While he was at it, the chairman touted the Boeing Zero G flight, which enables Dad to experience the weightlessness that astronauts do when they’re training. Having tried it himself, Levin nudged others on the call to give it a whirl.
“You just get giddy on this airplane,” he said. “It’s so much fun.”
Fun isn’t what Sharper Image has been having. Beyond the sales slump, the company has been battered on a number of fronts. There have been lawsuits by unhappy Ionic Breeze buyers, several earnings restatements and tardy regulatory filings that raised questions about whether the company might be delisted from Nasdaq.
As sales continued to tank last year, shareholders went on the warpath. Since the start of 2006, all but two of the company’s directors have been replaced, including Thalheimer, who had been chief executive. The president, chief operating officer and chief financial officer all have bowed out.
It was, Levin said, “one of the most difficult years in Sharper Image’s history.”
Now the company is replenishing its ranks. A new CEO, Steven A. Lightman, took the reins April 9. The former president of Crosstown Traders Inc., a direct marketer of clothes, food and gifts, has a quarter-century of experience in managing catalog and direct-mail sales.
Rebecca Roedell has just been named chief financial officer, a position she held at Tower Records after that company’s bankruptcy. That’s good for Sharper Image, said analyst Cid Wilson of Kevin Dann & Partners, because she may know how much the company will have to cut “if they’re going to be viable.”
“I do think they need to make some deep and painful cuts if they want to survive and be profitable,” Wilson said.
There was good news recently. Same-store sales beat analysts’ expectations in the last two months. After 21 consecutive months of double-digit declines, sales slid 8% in May -- better than the 13.8% drop Wall Street was expecting and a great improvement from the 36% plunge in May 2006.
And analysts are predicting that Sharper Image will narrow its loss to $1.67 a share this fiscal year, coming in the wake of last year’s $4-a-share loss. The company expects to release first-quarter earnings by Monday, the day after Father’s Day.
Dawn Tucker, a stay-at-home mom from Mission Viejo, was one shopper at the Fashion Island store who didn’t want Sharper Image’s turnaround plan to change things too much. “There’s such a diverse variety here,” she said, eyeing a $149.95 blood-pressure cuff.
Last Father’s Day, her father-in-law got a motorized Sharper Image scooter. At Christmas, her 9-year-old son got a Sharper Image massage bed rest, complete with light and cup holder.
But the fathers of some browsers at the shop could wind up with another tie. Jacob Becker, a recent Air Force Academy graduate, said Sharper Image’s offerings weren’t for his dad.
“He doesn’t like all these kind of gadgets,” Becker said. “He just now learned to turn on his computer.”
