Here's a hot stock tip: When a company says it plans to reverse enormous drops in sales and earnings by sending its shoppers a postcard, you may want to start looking for the nearest exit.

That amusing but sad turnaround plan is -- unfortunately for shareholders -- the only source of smirks in Bombay's (NYSE:BBA) latest earnings release.

The furnishing retailer is looking a lot like fellow exotics peddler Pier 1 Imports (NYSE:PIR) these days, but with a much worse same-store sales performance, if you can believe that.

For this year's second quarter, revenues fell 6% to $122 million. Comps were down 18% (down 25% for the month of July!), but that was just the beginning of the trouble. Gross margins were worse by 4.8%. SG&A increased 2.5% as a portion of sales. You can do the math. Shrinking sales + increasing cost of goods + increasing administration expenses = 1 bad quarter. The red ink totaled $0.18 per share, which was much worse than the negative $0.02 per share for the prior year's quarter.

That made it three in a row for quarters of negative earnings performance, and, throwing gas on the pyre, it marked the first time in a long while that total revenues have come up short.

What's the problem? Perhaps too many shoppers are opting for inexpensive knockoffs and bringing their dollars to discounters such as Wal-Mart (NYSE:WMT) and Target (NYSE:TGT). Or maybe people have lost their craving for the foreign and are turning to the more classic lines offered by the likes of Bassett Furniture (NASDAQ:BSET).

Management scaled back plans for new store openings, which is wise considering that the firm can't deliver from its existing retail base. When you're losing money at an accelerating rate, more sales simply put you underground at a faster rate. It's the kind of performance that might make for a good short, though the company's debt-free balance sheets insulate it from a creeping credit crisis that might otherwise be the final nail in Bombay's coffin.

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Seth Jayson visited a sad and empty Bombay store at a nearby mall this past weekend, but he has no position in any company mentioned. View his Fool profile here.