Battered specialty retailer
( SHRP), seeking to turn its fortunes around, named Steven Lightman president and CEO.
Lightman, who will start on April 9, most recently served as president of Crosstown Traders, a unit of
He will replace Jerry Levin, who was named chairman and interim CEO in September following the departure of founder Richard Thalheimer. Levin will remain chairman.
"We are delighted to bring Steven's extensive direct marketing experience and proven retail management skills to Sharper Image," Levin said in a statement. "Throughout his career Steven has demonstrated an ability to manage complex and multi-channel operations, and has built a proven track record in developing and leveraging direct mail businesses."
Lightman was instrumental in forming Crosstown Traders, which was created from the purchase of apparel, food and gift catalogs that had belonged to
( FD) and its Fingerhut subsidiary. Crosstown was acquired by Charming Shoppes in 2005, and Lightman served as president until January 2007.
Lightman will have his work out for him. Since November 2004, San Francisco-based Sharper Image has reported 28 straight months of negative same-store sales, or sales at stores open at least a year, according to Thomson Financial. Most recently, February same-store sales plunged 24%.
"This appears to be a good hire for Sharper Image," Cid Wilson, director of research at Kevin Dann & Partners, wrote Monday. "Sharper Image's direct-to-customer business makes up 40% of the company's total revenues, and the retail stores generate sales partially as a result of the products that are marketed via the direct-to-customer business."
Wilson, who maintained his hold rating on the company, advised investors to be cautious about the new CEO.
"Mr. Lightman may need to make some painful decisions if he is to rescue the company," Wilson wrote. "This may include potential store closings as well as the closing of one of its three distribution centers, or at least the restructuring of the usage of those
Analysts say Sharper Image's troubles stem from the company's relying too heavily on its Ionic Breeze air purifier. Wilson says that as much as 40% of the company's sales are tied up in the product, which has been hurt by increased competition and heavy criticism from
"It's a one-product company," says Scott Rothbort, founder of LakeView Asset Management and a contributor to
. "It's one of those places that are great to visit, but people don't want to live there, so to speak. People like to go in there and play, but they don't buy. They can probably find the same stuff on the Internet, only cheaper."
Wilson says that the purifiers were a high-margin item and that the company's lower-margin items don't have the same inventory turnover, resulting in what he calls a "double-whammy."
"When the Ionic Breeze came out, they hit the jackpot," Wilson says. "It was high in margin, high in average ticket and high in inventory. They have good stuff that would actually sell well under normal circumstances. It's just that none of these products can replace the Ionic Breeze."
In a quarterly filing with the
Securities and Exchange Commission
, Sharper Image signaled that sales for the air purifier product line aren't expected to improve anytime soon.
"Beginning in 2005, sales of this line of products have declined significantly, which has adversely affected our sales and net income," the filing said. "We expect the sales of this line of products to decline in the foreseeable future, which may adversely affect our future profitability."
Wilson points to the Father's Day shopping period as a key time for Sharper Image. If the company gains some traction, he expects the stock to go up rather quickly. But if the company doesn't pick up some momentum at Father's Day, it is liable to find itself orphaned by shareholders.
"While Mr. Lightman commands creditability in the direct-to-customer business, neither Crosstown Traders nor Fingerhut had the problems of being dependent on one product or jumpstarting sales on a product that no longer commands differentiation in the industry," Wilson wrote.
"Sharper Image's strength is in product differentiation, and the company may be set for a turnaround if Mr. Lightman finds the right connection with Sharper Image's core customer," he continued. "However, we have yet to be convinced, and would advise investors to remain cautious with
the company's shares if they rise about $11 to $12 as this upward movement may be short-lived."
Shares of Sharper Image recently were down 3 cents to $10.37.