Cash-starved Sharper Image to shrink
By Brent Felgner -- Gifts and Dec, 2/20/2008 10:12:00 AM
WILMINGTON, Del.—Sharper Image has filed for Chapter 11 bankruptcy protection citing a liquidity crisis, increased competition and a tightening overall economy that produced weak holiday sales.
Sharper Image said it will immediately seek to close 90 of its 184-store base following inventory liquidations. It named turnaround specialist Robert Conway as CEO, replacing Steven Lightman who has left the company. The retailer said it will seek to reorganize while also seeking to “maximize the value of the estate.”
“Sharper Image is in a severe liquidity crisis that is attributable to a host of factors, including among others, increased competition, and deteriorating gross margins, the negative impact of pending litigation and resultant loss of consumer/market confidence, contraction of credit from vendors and suppliers, and maintenance increases in the number of noncontributing stores,” the company’s court filings stated.
Despite its efforts to restructure operations and rebuild senior management, the company’s “liquidity position has not improved and additional working capital is urgently needed to continue and sustain operations and maximize value,” the court filings said.
Sharper Image, once known for the uniqueness of its product assortments, has been struggling with declining sales and profitability for several years as insurgent multichannel competitors have begun offering similar merchandise. In recent years, the company has begun relying on the sales of its air purification devices and massage chairs. At the same time, its overall product mix has included a sharp increase in the sale of toys. A trio of its buying executives was seen walking Toy Fair mid-afternoon on Tuesday.
Earlier in February, two board members resigned.
Sharper Image reported a January sales decline of 23 percent overall and 11 percent on a comparable store basis, to $22.2 million, compared to last year’s $28.7 million. Fourth quarter sales declined 16 percent, and total comparable store sales slid 10 percent. The company reported Q4 sales of $164.1 million. For the year, total sales decreased 26 percent to $374.9 million.
It will continue in operation and has arranged debtor-in-possession financing with Wells Fargo Retailing totaling $35 million initially, up to $60 million overall, and availability of up to $10 million in letters of credit. The DIP financing is pending bankruptcy court approval. The company said it will seek to reorganize while seeking to “maximize the value of the estate.”
The company listed total liabilities of $199 million and assets of $251 million. Its top 20 unsecured creditors listed more than $26.2 million in outstanding debt.
Sharper Image last year reported that nearly 71 percent of its business was done in its stores, 7 percent in its 3 million to 4 million monthly catalogs and nearly 15 percent on the Internet. Catalog and Internet sales have been declining over the last three years as a percentage of the company’s overall sales.
We would love your feedback!
Featured Company
-
FurnitureCore.com
FurnitureCore.com is a dynamic web application aimed at the furniture industry. Retailers and manufacturers alike will find our deep reserve of tools to be exactly what their furniture business needs.www.furniturecore.com... more
VIEW ALL GALLERIES
