Sharper Image Cuts Outlook

Specialty retailer Sharper Image Corp. offered a gloomy earnings outlook Monday after weaker-than-expected holiday sales, sending its shares plunging 18%.

The San Francisco-based company, known for products like air purifiers, robotic floor vacuums and massage chairs, said sales from Dec. 1 to Dec. 24 increased only about 4% over last year -- significantly less than the 15% to 18% that Wall Street anticipated.

What’s more, Sharper Image said it expected fourth-quarter earnings of 94 to 99 cents a share, compared with $1.40 in the same quarter last year.

In response, investors sent Sharper Image down $4.18 on Monday to $18.96 on Nasdaq.

Not only was store traffic lighter than expected, the company said, but Internet and catalog business also was soft. “Overall our sales this holiday season were disappointing,” said Richard Thalheimer, Sharper Image’s chief executive.

Analysts blamed a shortage of hot electronic items, such as Apple Computer Inc.’s iPod digital music player, plus a decline in the popularity of higher-margin Sharper Image products, such as the Ionic Breeze air purifier, which make up about 30% of total sales.

“The only products that were doing well for them this year were the iPod and the Robosapien” toy robot, and stores ran out of both, said Rob Wilson of San Francisco-based Tiburon Research Group, who rates Sharper Image stock a “sell.”

Holiday margins were hurt, the company said, because it had to pay for many products manufactured overseas to be flown into the U.S. when ships got stuck in jam-ups at busy West Coast ports.

“The company completely mishandled the West Coast port delays,” said analyst Robert Straus of IRG Research in New York, who rates Sharper Image shares a “sell.”

And while other specialty retailers, such as Brookstone Company Inc., rolled out more than 100 new items this holiday season, Sharper Image offered just 25, Straus noted. “Sharper Image needed to bring in more product for the holiday season much earlier.”

For its fiscal year ending Jan. 31, Sharper Image said earnings would be 90 to 95 cents a share, down from $1.65 a share a year earlier.

Analysts surveyed by Thomson First Call had expected the company to earn $1.14 a share in the fourth quarter and $1.11 for the year. About 90% of annual profit is generated in the fourth quarter, Straus said.

Reuters was used in compiling this report.