Novice Investing - Sharper Loss at Sharper Image

Date: Monday 01st 2008f December 2008 03:29:49 PM

Sharper Loss at Sharper Image - 11/22/2005

By: Novice Investing Staff

Sharper Image Corp. (SHRP) reported third quarter loss of 70 cents per share or $ 10.5 Million compared to 24 cents per share last year. Shares currently trade close to its 52 week low of $ 8.75.

Balance Sheet looks strong at Sharper Image while it is not as strong as it is used to. The company has been experiencing sluggish sales and declining same store sales for the past year. It has been reporting losses for a while now and it is understandable while the balance sheet is weaker now. For the quarter ending on July 31st 2005, it reported a positive net cash of $ 45 Million or $ 3.01 per share. That is down from $ 3.95 per share when we last profiled it among companies with solid balance sheet.

The decrease in cash balance is due to the losses incurred by the struggling companies. We are fairly sure that the positive net cash for the latest quarter will be less than $ 3.01 since it reported third quarter loss of 70 cents per share.

Should we worry about the rapid decline of the cash balance? Yes and no. The fact is Sharper Image is a retailer with seasonal sales, experiencing strong sales during the November- January period. For the rest of the year, the company normally experiences a small quarterly loss. It is worrying if Sharper Image does not turn things around quickly. For the fiscal year, Sharper Image is expected to lose $ 0.70 per share. Current balance sheet can still withstand losses for a few more years. If business stays sluggish, balance sheet will deteriorate further, making it a more risky investment.

What is exciting about the company is that once things turn around, it can easily earn over $ 1 per share annually. It earned as high as $ 25 Million or $ 1.74 per share for the fiscal year ending on January 2004. But, that day probably will not come soon, judging from the recent weakness at the chain.

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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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