The Sharper Image (SHRP) is a cool store, bad stock

Just about every dude in America has set foot in a Sharper Image (SHRP) store because let's face it, they have a ton of cool stuff. We look around, get amused by all the electronic nose clippers and Star Wars related junk. Then we look at the price tags just to see how much and as usual say -- "I'd never pay that much for that thing".

Most of the goods sold at the Sharper Image are just too expensive and is it really a wonder they just reported weak sales last week?

No.

Great store, cool stuff, just too damn expensive. Shares of the Sharper Image Corp. (SHRP) fell 32% yesterday and hit a new 52-week low thanks to the Florida class action suit against them. Today shares of SHRP have recovered a little and you can now pick up a share of SHRP for around $4.15, which is about $90 cheaper than any one item they sell in their stores. Last week Sharper Image reported a 15% same-store sales decline in July, needless to say, Wall Street and investors were pissed. BMO Capital Markets cut their 2007 forecast to a loss of $2.80 per share from a loss of $2.75 per share. Add to that their shrinking annual revenue numbers since 2006 (2005:$760M, 2006:$668M , 2007:$525M) and investors are finding it a hard sell to own Sharper Image shares.

America, the love affair with the Expensive-Guy-Toy-Store is over, I'd rather walk into a RadioShack (RSH). Let's be honest guys, are you really going to buy this thing?

R2-D2 Interactive Droid
#HB450
R2-D2™, the Interactive Astromech Droid™, is ready to serve you!
$119.95

It's on sale and you can buy it at their website, here's the link, but even if you pony up the $100+ for this thing, you know it will get old after about 15 minutes. Does it help that 'Astromech' is in the title? This is ridiculous. Think Lucas really has one of these things in his house? Furthermore, there's really three things that will happen if you buy it:

1. You show your friends while you're drinking some beers, they laugh for the first 5 minutes. Then everyone makes fun of you and 20 minutes later they make R2-D2 go down your stairs -- that's the end of that investment.

2. Your dog gets a hold of it before you can even put batteries in it because it spooks the hell out of him. He sets in on ol' R2 and before you can say 'ewok' --that's the quickest 100 some bucks you've ever spent. Either that or he does this...

3. Your wife/significant other takes one look at it and informs you that if you don't return it within the next 30 minutes and get a full refund she's never speaking to you again. You give the argument 'but it's from my childhood and I can do whatever I want with my money, why I...", before you can finish she responds with "just play with your action figures and get that damn thing out of my house!"

Let's face it, now the Sharper Image has more than your unappreciated girlfriend to worry about, regardless if they pay $900 million or $2 million to settle the Florida class action lawsuit filed by 27 state attorneys general and some plaintiff attorneys concerning its air purifiers, they still have to sell merchandise.

Fellow Masters, every retailer has one major benchmark that they have to hit to increase their share price -- same-store sales. The Sharper Image Corp. is in the dog house with a 15% decline. There's no getting around it, what else could they do to raise the value of their shares?

A buyback? Sell the company? That's not even in the cards. The day traders are having a field day with this stock, and why not when you have analysts now upgrading the stock based on it's low share price. Despite today's rally, shares of SHRP are down 59% over the last 6 months, so what does that tell you?

Investors hoping to cash in on Sharper Image (SHRP) returning from the dead have a better chance of seeing Jar-Jar Binks reinvent himself.

As Anakin once said to R2, 'I know we're in trouble, just hang on!' Think they can program that message for would-be investors of SHRP?

Love the store, hate the stock.

Article written by: Frank Lara Jr.
Article posted on: August 17th, 2007

Disclaimer: The Author does not have any positions in SHRP.