Nose-hair trimmers and air purifiers are nothing to sniff at. The world of specialty retailing tries to catch our fancy and our dollars.
But it can be a serious business as well, which is why Wall Street has lately been taking the stock of Sharper Image Corp. to task.
I first interviewed Sharper Image founder and CEO Richard Thalheimer years ago when his firm was still so new that he came to the reporters rather than the other way around. As he demonstrated a few gadgets he seemed shy and self-effacing, grateful to share the story of his company.
Not the entrepreneurial aura of Virgin CEO Richard Branson. More of an earnest science-fair winner.
Fast-forward to 2005 and The Sharper Image board of directors has just approved a target bonus of $712,800 for CEO Thalheimer if the company achieves earnings per share greater than its target number this year. Known for hit products such as the Razor scooter and Ionic Breeze Silent Air Purifier, it sells them through 178 U.S. stores, its catalog and its Web site.
Thalheimer, who still owns 35 percent of the publicly traded company, has frequently been featured in its advertisements, financial success apparently bringing him out of his shell. But most recently he has been defending the safety of his firm’s best-selling product, of which it has already sold 2 million units.
Here’s why Sharper Image’s investment image has blurred:
– Consumer Reports Magazine recently stated the Ionic Breeze did a poor job of removing dust, smoke and pollen from the air and failed the standard industry test for ozone generation.
This comes two months after Sharper Image paid $525,000 to settle a product disparagement suit brought against Consumers Union for negative comments about the product in the magazine in 2003. Thalheimer “adamantly refutes” the Consumers Union stance and has asserted that it is not an ozone generator, but Wall Street remains wary.
– The firm is restating financial statements for fiscal years 2003, 2004 and the first three quarters of fiscal 2005 to correct overstated earnings and certain balance sheet items as a result of calculation mistakes. These were detected in a company review and Sarbanes-Oxley compliance.
– Its outlook for first-quarter results was lower than Wall Street had expected.
Don’t ever think that just because a company is in the “fun and games” business it can never run into serious problems. Sharper Image (SHRP) shares receive a consensus “hold” rating from analysts, according to First Call, consisting of one “strong buy,” one “buy,” eight “holds” and two “sells.”
Meanwhile, Wall Street analysts currently prefer rival Brookstone Inc. (BKST), which has 275 stores, three types of catalogs and two Web sites. Its shares receive a consensus “buy” recommendation of four “strong buys,” three “buys” and one “hold,” according to First Call.
