Sharper Image Turns Dull in August

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The August heat melted the share price of Sharper Image Corp., San Francisco. Investors holding the multichannel marketer's stock saw its value plummet 34.6 percent from July 27 to Aug. 31, falling from $27.46 to $17.95, while at least two analysts downgraded the stock.


The bad news started early in the month when Sharper Image announced July sales numbers. Though the company reported double-digit increases in total company sales, total store sales, catalog/direct marketing sales and Internet sales for July, the second quarter and first six months, it lowered its earnings guidance because of lower-than-expected sales for the second quarter.


Based on preliminary second-quarter results, the company said "it is also prudent" to lower full-year earnings-per-share guidance to $1.83 to $1.87 per diluted share, down from prior guidance of $2 to $2.04.


That announcement caused Sharper Image's stock price to drop to $19.43 Aug. 5 from the previous day's close of $25.49.


"While our July sales increases come on top of excellent increases in the prior year, they were below our expectations," said Richard Thalheimer, company founder/chairman/CEO. "We believe that increased travel, good summer weather and competition generally from election-related media spending contributed to this lower return on our advertising expenditures."


The company offered more good news/bad news last week with its August sales. Though it again reported double-digit increases in total company sales, total store sales, catalog/DM sales and Internet sales, it posted a comparable-store sales decrease of 6 percent. In afternoon trading Sept. 2, the stock stood at $17.72.


According to CBS MarketWatch, Kristine Koerber of W.R. Hambrecht lowered her rating on the stock to "sell" from "hold," while J.P. Morgan's Brian Tunick dropped his rating from overweight to neutral.


"Clearly, we believe there are more questions than answers, and we do not think that the company even has a full grasp on what is suddenly ailing its business," Tunick was quoted as saying in a note to investors.


Koerber was quoted as saying in her note that Sharper Image's shares will continue to slide until positive comps emerge, something not anticipated this year.


"Comp trends are down sharply," she wrote. "The slowdown in business is the result of lack of new product, lower infomercial spending, lackluster customer response to catalog mailings, macroeconomic factors and customer distraction possibly [because of] the Olympics and presidential election."


In other news, Pitney Bowes completed its acquisition of Group 1 Software (GSOF), and its stock was delisted. JoS. A. Bank Clothiers Inc. had a 5-for-4 stock split. Cabela's was added to replace Media Services Group Inc., which no longer does any direct marketing business.


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