Sharper Image Slashes Guidance

The fog is rolling in at Sharper Image (SHRP Quote).

On the back of a disappointing just-completed fiscal 2005, the San Francisco-based company warned late Thursday that it expects flat sales for fiscal 2006 ending next January. Its shares dropped 16% Friday.

Sharper Image also warned of a sharp first-quarter shortfall. The company expects to post a loss of 28 cents to 32 cents per share for the quarter ending April 30, as compared with a 4-cent loss predicted by the Thomson First Call analyst consensus. The company earned 13 cents a share for the same period last year.

Sharper Image expects sales in stores open at least a year to decline from a year ago by a percentage in the low teens. Total sales will fall in the high-single digits percentagewise from last year's $156 million, leaving them well short of the $169 million analyst estimate. Gross margin will fall to 55% to 56% from 60% a year ago.

For the year ending Jan. 31, 2006, the company expects same-store sales to decline in the mid- to high-single-digit range, and total sales to be flat with the 2005 total of $737 million. The company expects to earn 60 cents to 95 cents a share, well short of the Wall Street estimate, which called for earnings of $1.12 a share on sales of $855 million. Margins will stay in the 54%-55% range.

The company, best known for its high-end air purifiers, massage chairs and compact stereos, was coming off a weak holiday season. For the quarter ended Jan. 31, same-store sales decreased 6%.

Shares fell $2.78 Friday to $14.16.