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Stockholders Take Action Against Sharper Image

A group of Sharper Image stockholders filed a class action lawsuit against the company, the law firm representing the stockholders reported yesterday.

The complaint alleges that between Feb. 5 and Aug. 4, 2004, certain officers of Sharper Image Corp., San Francisco, made false and misleading statements regarding the state of the company's business that caused its stock to trade at inflated levels. Also in the period, Sharper Image's top officers sold more than $18 million worth of their own shares, according to the lawsuit.

Sharper Image's wholesale, Internet and catalog businesses were cannibalizing its retail and infomercial sales, a fact known by the defendants, the complaint further alleges. It also claims the company's profitability was harmed by a slowdown in sales of the company's key product line, the Ionic Breeze family of air purifiers, which has been accused of not living up to claims in several reports on air purifiers.

Also, the lawsuit claims that when the defendants tried to acquire infomercial blocks of time in early 2004, they learned that these blocks already were acquired as a result of the Olympics and the presidential election. The additional costs associated with infomercial time hurt Sharper Image's margins associated with the Ionic Breeze, the suit said.

The lawsuit was brought by Lerach Coughlin in U.S. District Court for the Northern District of California.

Sharper Image posted a 3 percent drop in sales for March, totaling $53.1 million. Comparable-store sales dipped 9 percent. Catalog/direct marketing sales decreased 8 percent to $15.8 million. Internet sales alone decreased 12 percent to $8.7 million.

Chantal Todé covers catalog and retail news and BTB marketing for DM News and DM News.com. To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting www.dmnews.com/newsletters

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