Wilmington, Del. — Specialty retailer Sharper Image has filed for Chapter 11 protection with the U.S. Bankruptcy Court, here.
The company, known for its proprietary electronics devices, said it is in a “severe liquidity crisis” and will shutter 90 of its 184 stores and sell off unprofitable inventory in an effort to conserve cash. It had total assets of $251.5 million and total debt of $199 million at the close of its most recent fiscal year, ended Jan. 31.
Sharper Image’s sales, earnings and stock market value have cratered over the past four years after its core product, the Ionic Breeze air purifier, was vilified by Consumer Reports magazine, resulting in numerous lawsuits. Meanwhile, indoor malls, the bastion of its store base, lost favor with shoppers, and its executive gift-type assortment was eclipsed by the advent of iPods, GPS devices and other popular and universally available portable CE products.
Also contributing to its woes were compressed margins and tighter credit terms from suppliers, the company indicated. It is seeking approval of a $60 million debtor-in-possession loan from current lender Wells Fargo to fund operations, and said Chapter 11 protection would allow it to sell off underperforming stores and free itself from unfavorable leases.
GPS device makers TomTom and Garmin International are among the company’s largest creditors, with unsecured claims of $2.1 million each.
Sharper Image’s sales have fallen for 11 consecutive quarters and losses have totaled $136 million since January 2005. During its most recent fiscal year, net sales fell 26 percent to $374.9 million and same-store sales declined 13 percent.
Founder and CEO Richard Thalheimer was ousted in 2006 after the company’s stock market value had fallen by more than 75 percent, and his successor, Steven Lightman, was replaced earlier this month by distressed business specialist Robert Conway. Jerry Levin remains chairman.
The company said it intends to “continue to conduct business as usual while it devotes renewed efforts to resolve its operational and liquidity problems” and develops a reorganization plan.