Sharper Image has filed
for Chapter 11 of the U.S. Bankruptcy Code. Chapter 11 is the reorganization section of the Code which is filed when the company proposes a plan to repay creditors, get new financing and turn things around.
Retailer Sharper Image Corp has filed for Chapter 11 bankruptcy protection, citing declining sales, three straight years of losses and litigation involving its Ionic Breeze air purifiers.
The San Francisco-based company filed for protection late Tuesday in U.S. bankruptcy court in Wilmington, Delaware. Sharper Image said it had $251.5 million in assets and $199 million in debt as of January 31, according to the filing. Cash on hand totaled about $700,000.
Its shares plunged 92 cents, or 64 percent, to 52 cents on Nasdaq.
"Sharper Image is in a severe liquidity crisis," Chief Financial Officer Rebecca Roedell said in a separate filing.
She said the company has suffered from increased competition, narrowing margins, litigation, lower consumer and market confidence, tighter credit from suppliers, and poorly performing stores.
"The foregoing has been compounded by the ever-tightening and volatile credit and financing markets," she added.
Sharper Image has seen its sales decline steadily since 2004, and has posted net losses in fiscal 2005, 2006, and 2007.
According to court papers, the electronics retailer also cited "negative publicity" from the litigation involving its Ionic Breeze air purifiers for its falling revenues.
In October, a federal court denied approval of a settlement of class-action suits related to the efficacy of the air purifiers. The product was sold to 3 million consumers, according to a previous filing.
The company wants to borrow money, tighten up the organization and reorganize. But one has to ask: has Sharper Image's time passed? It was an innovator twenty years ago, but recently it seems to be a store full of gadgets that nobody wanted. There is no question that the air purifier disaster really hurt the company, as well. If things don't go well, it will have to convert to a Chapter 7 -- that's the liquidation part of the code -- and all the assets would be sold to pay off creditors. We hate to be pessimistic on a once-thriving American company, but things don't look good in Sharper Imageland.
