Financial Reports: Sharper Image, Dell, J. Crew, Restoration Hardware

Sharper Image Ends 2006 with $60 Million Loss
At $60.0 million, Sharper Image Corp.’s loss for fiscal 2006 was nearly four times that of its 2005 loss of $16.1 million. In response, officials at the electronics gadget cataloger/retailer said in a release that they are changing “nearly all aspects” of their business strategy.

Annual sales for the San Francisco-based company fell 21.5%, to $525.3 million from $669.0 million in 2005. Direct marketing revenue, which includes catalog, the Internet, and infomercials declined nearly 18%, to $160.7 million from $195.1 million.

In September, following 18 months of shrinking sales and profits, company founder Richard Thalheimer was replaced as chairman/CEO. Turnaround specialist Jerry W. Levin, who has been on the board since July 2006, was tapped as chairman and interim CEO. The company paid Levin, his company JW Levin Partners, and other consultants $1.8 million. Sharper Image also granted $250,000 in options to Levin and other consultants. Private equity firm Sun Capital, meanwhile, paid Thalheimer $13.75 million for his shares in the company last month, making it Sharper Image’s largest shareholder.

In November, Sharper Image’s president/chief financial officer quit. Two months ago, the company hired Steven Lightman as president/CEO, keeping Levin as chairman. Rebecca Roedell is the new CFO, while interim CFO Daniel Nelson continues as the company’s controller.

Officials declined to detail changes in their business strategy. They did say that they’d stop selling refurbished products, however, and that the company has closed some underperforming stores.

Sales Up Slightly at Dell
First-quarter sales at Dell rose less than 1%–not enough to prevent the computer giant from announcing plans to lay off 10% of its worldwide workforce during the coming year. For the three months ended May 4, the Round Rock, TX-based company had sales of $14.6 billion. First-quarter earnings declined, meanwhile, to $759 million from $762 million last year.

This month Dell is expanding its sales channels by offering two computer models for sale in Wal-Mart and Sam’s Club stores nationwide (see “Dell Expands Beyond Direct with Wal-Mart Deal”).

J. Crew Sees Sales, Income Rise
Apparel cataloger/retailer J. Crew had plenty of good news to report from its first quarter ended May 5. The New York-based company’s revenue for the quarter rose 24%, to $297.3 million from $240.6 million for the first quarter of last year. Internet and catalog sales jumped 31%, to $86.6 million from $66.2 million. Store sales (retail and factory) increased 20%, to $201.0 million. Same-store sales rose 13%. And net income more than tripled, to $24.6 from $7.8 million last year.

Restoration Hardware Scores Direct Hit
First-quarter direct-to-consumer sales for home decor cataloger/retailer Restoration Hardware rose 38%, to $58.6 million from $42.3 million last year. For the 13 weeks ended May 5, total revenue was $142.1 million, up 7% from last year’s $133.4 million. Retail sales, however, fell 8%, to $83.5 million. And the Corte Madera, CA-based company’s net loss nearly tripled, to $13.7 million from $4.9 million.

CEO Gary Friedman characterized the first quarter as “particularly challenging” in a release: “We experienced below-plan sales in April, primarily in our outdoor and seasonal businesses, with the majority concentrated in the Eastern region of the country. We believe this was due to the fact that the second mailing of our Outdoor catalog dropped on April 5 during adverse weather conditions in the East. We also are experiencing ongoing softness across our business due to the challenging home furnishings environment and the effects from the slowdown in the home building industry.”

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