Cost Cuts on Sharper Image’s Agenda

Cost-cutting is a priority for San Francisco-based Sharper Image Corp. this year. Layoffs and decreasing catalog page counts are among the ways that the marketer of high-tech gadgets is coming to terms with the cooling off of its business after several years of intense growth, says director of investor relations Tersh Barber.

Fiscal 2004 “was still a year of record revenues for us,” Barber explains. And while the multichannel merchant expects sales in 2005 to be lower than last year’s, they’re still projected to exceed those of 2003. “This headwind in our business, if you want to call it that, is allowing us to focus on some expense control and really re-right-size our business,” Barber says.

Advertising, which includes catalogs and infomercials, is one area where Sharper Image plans to rein in costs. Total circulation will increase in the fiscal first quarter of ’05 in the “very low teens,” according to a transcript of the company’s Feb. 10 conference call with investors, and for the year it will increase by the mid single digits. “I believe that in the past we have typically talked about catalog circulation [year over year] that has been up between 5%-10%,” Barber says, “so this is on the low end of that range.” What’s more, total page count for fiscal 2005 will be down in the mid-teens.

The company has also laid off 10% of the employees at its headquarters. Executives as well as nonsalaried workers, such as call center reps, have been let go. “It affected just about every [staff] group we have,” Barber points out. “We looked across all payroll costs, and we didn’t focus on one particular area over another.” No additional layoffs are in the works, Barber adds.

Realizing that cost-saving measures alone will not get the company back into growth mode, there will also be new product offerings in the category of MP3 music system accessories that would complement products such as the Apple iPod that some have said gave Sharper Image fierce competition during last year’s holiday season. “We’re not at all trying to compete with the iPod,” Barber says. “There are over 10 million iPods in people’s hands. The advantage is knowing those devices are out there and focusing on how that music can be played. We’re thinking about accessories.” Just what those accessories are, Barber won’t say, but they will likely be unveiled come the early fall selling season.

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