Dim Reality at Sharper Image

The shares tank after it forecasts a loss in its current quarter.
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Shares of

Sharper Image

(SHRP)

were under pressure Friday after the company unexpectedly predicted it will lose money in its third quarter and was downgraded by J.P. Morgan.

The San Francisco-based gizmo retailer, which also reported an in-line second quarter, expects to lose 8 cents to 11 cents a share in the three months ending in November. Analysts surveyed by Thomson First Call had been expecting earnings of 5 cents a share.

"This guidance is based on lowering sales for the third quarter relating to softer-than-expected sales in the first half of August," the company said. Sharper Image also dropped full-year guidance to earnings of $1.65 to $1.69 a share from its previous $1.83 to $1.87 a share.

The stock was trading at a 52-week low of $15.45 on Instinet, down $1.45, or 8.6%, from Thursday's close.

Second-quarter revenue rose 20% from a year ago to $149.0 million on a 1% gain in same-store sales. Total catalog and direct marketing sales rose 28% from a year ago to $39.0 million.

J.P. Morgan cut the shares to neutral from overweight and slashed its 2004 earnings estimate to $1.41 from $1.64.