Just a week after firing its chief executive and appointing a new turnaround specialist as the next CEO, Sharper Image has filed for bankruptcy in Delaware. Next up: implementing a plan to improve performance, including e-commerce.
Just a week after firing its chief executive and appointing a new turnaround specialist as the next CEO, Sharper Image Corp. has filed for bankruptcy.
In a terse statement, Sharper Image, No. 122 in the Internet Retailer Top 500 Guide, said it has filed for Chapter 11 bankruptcy status in the U.S. Bankruptcy Court for the District of Delaware.
Sharper Image intends to conduct business as usual while it devotes time to resolving its operational and liquidity problems and develops a reorganization plan, the company says.
Though Sharper Image has yet to release any details, the plan will be executed by new CEO Robert Conway, a founding member of retail turnaround firm Conway, Del Genio, Gries & Co.
The change in CEO is the second in less than a year for Sharper Image, which named Steven Lightman as CEO in March 2007 to replace company founder and top manager Richard Thalheimer. For the transition between Lightman and Thalheimer Sharper Image used Jerry Levin on an interim basis.
Conway has more than 25 years of experience advising companies on financial and operational issues as a banker, consultant and senior executive officer, Sharper Image says. The retailer also has retained other specialists from Conway, Del Genio, Gries & Co to assist with implementing necessary operational changes.
The first order of business is improving Sharper Image’s declining financial performance, particularly in e-commerce. Sharper Image has yet to break out its final year-end financials. But preliminary results show that comparable store sales decreased by 13% in 2007, while total company sales in 2007 were $374.9 million compared to $506.7 million in 2006, a drop of 26%. The company didn’t provide guidance on the change in year-over-year net income.
For the third quarter, web sales dropped by 47% to $8 million from $15 million in the prior year, the company told Wall Street analysts on a recent earnings call.
At the same time Sharper Image reported a net loss of $22.7 million on sales of $69.5 million in Q3 vs. a net loss of $22.1 million on sales of $106.2 million in Q3 of 2006.
Even though the web is a weaker channel for Sharper Image, the Internet and e-commerce will play a pivotal role in any attempt at a corporate turnaround, says one retail analyst. “When they emerge from bankruptcy, they are going to have to do a better job of reacquiring and targeting customers who want their higher-end gadgets and only the Internet will do the best job of that for them,” says Jim Okamura, senior partner at consulting firm J.C. Williams Group Ltd. “The turnaround is not going to come from more traffic to their mall stores, which is very high-priced real estate.”