Novice Investing - Catching A Falling Sharper Image

Date: Sunday 20th 2008f July 2008 12:39:16 PM

Catching A Falling Sharper Image - 09/06/2007

By: Hari Wibowo

Sharper Image Corp. (SHRP) is in our focus again as share price plunged to below $ 5 per share briefly in August. Back in May 2007, we discussed the possibility of Sharper Image falling further as a result of continuing losses. This past month, Sharper Image again reported declining same store sales of 16%! Year to date, Sharper Image reported 32 percent lower sales at $ 165.3 Million while catalog sales fell by two thirds. What is happening here? This is like poultry makers getting the case of bird flu. The rate of deterioration is just unbelievable. Meanwhile, Sharper Image shares plunged 9.5% as we speak.

Tell me what you should make of it. Losses losses and losses.

Fiscal Year	2005	2006	2007	2008 (*)
Net Profit	$ 0.71	($ 1.07)	($ 2.40)	($ 2.75)

(*) = estimate

With the latest announcement of yet another same store sales decrease, EPS losses are expected to widen. Recently, Sharper Image spotted a slight negative net cash on its balance sheet. While there are many companies with higher debt level than cash, if they keep losing money, their survivals will be in doubt. The same thing can be said to Sharper Image. While we were intrigued by the possibility of owning Sharper Image as an investment a few years back, things has not gotten any better while cash reserve had evaporated.

Back in 2004, the company earned $ 25 Million or $ 1.74 per share. If you are salivating at the potential of earning $ 1.74 per share, don't. The first hurdle that Sharper Image has to pass is to stop the decrease of same store sales which will ultimately drive profit. Until then, investing in Sharper Image is purely speculative in nature.

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Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding Sharper Image Corp. (SHRP) or any other securities.

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