An investor group that includes two former Wall Street bankers said Thursday that it was seeking to replace Sharper Image Corp.'s entire board as part of a plan to overhaul the gadget retailer, whose stock had dropped 37% in the last year.
Shares of the San Francisco-based company, known for its air purifiers and massage chairs, rose as high as $12.60 before closing at $12.21, up $2.25, or 23%.
Knightspoint Group, which owns 12.8% of Sharper Image, includes Jerry Levin, former chairman and chief executive at Revlon Inc. and American Household Inc. The group proposed him as chairman, interim CEO or lead outside director.
Knightspoint also includes Michael Koeneke, former chairman of mergers and acquisitions at Merrill Lynch & Co., and David Meyer, who had been a director at Credit Suisse First Boston.
Sharper Image spokesman Tersh Barber said that the company received notice this week of the group’s intent and that the retailer’s board would consider the group’s concerns and would then “respond appropriately.”
Knightspoint’s plan includes cutting and redirecting marketing spending, deferring store expansion, eliminating significant quantities of slow-moving and obsolete inventory, adjusting executive compensation and overhauling the product development process.
Harris Nesbitt analyst Richard Weinhart said it was not surprising to see a group try to take control of the company, given the increasing number of investor groups agitating for change.
But he said there were no assurances that a new management team would have any more success in turning around Sharper Image, which has been trying to revive its business.
Sharper Image has been working to lessen its dependence on its Ionic Breeze air purifiers, which have driven sales. Despite efforts to attract customers with products such as accessories for MP3 digital music players, the company continues to falter, with February sales at stores open at least a year falling 31%.
Sharper Image posted a loss of $21.9 million, or $1.45 a share, for the nine months ended Oct. 31.
“It’s not as easy as essentially pulling out all their current inventory and replacing it with other products, because there’s a huge risk there,” Weinhart said.
The investor group also could run into difficulty wrestling control from Sharper Image’s founder, chairman and CEO, Richard Thalheimer.
He beneficially owned about 21% of the company’s common stock as of Oct. 31, and the company said in a regulatory filing that ownership gave him “substantial influence over the election of directors and over our corporate actions.”
In addition to Levin, Koeneke and Meyer, Knightspoint’s proposed slate of directors includes former KB Toys CEO Michael Glazer, former Epic Records Chairman David Glew, retail consultant Peter Weil and former Delia’s Inc. President Andrea Weiss.