Wall Street's closed for Good Friday tomorrow, so we're going to start the pre-weekend earnings previews a day early this week. Although most companies these days are already reporting their Q1 2006 numbers, there are still a few laggards bringing up the rear. For instance, when Sharper Image (NASDAQ:SHRP) reports on Monday, it will be telling us about its Q4 and full-year 2005 performance.
What analysts say:
- Buy, sell, or waffle? Eight analysts follow Sharper Image. Five of them give the stock hold ratings, and sells outnumber buys two to one.
- Revenues. For the quarter, analysts expect to see quarterly sales numbers slide 13% to $261.4 million.
- Earnings. Profits, too, are predicted to collapse. Analysts project a year-over-year decline of 52% to $0.43 per share.
What management says:
In its earnings report for fiscal Q3 2005, Sharper Image 'fessed up to a big $0.70 per-share loss. Yet the company's CEO spoke optimistically of better days ahead, citing a range of new products that it hopes will perk up the firm's flagging sales, including new sound systems for iPod and MP3 players, "exclusive interactive robots," and the Ionic Breeze air purifier (which isn't exactly new anymore). In summary, CEO Richard Thalheimer called 2005 a "transition" year -- a word right up there with "challenging," as far as its implications for a falling stock price are concerned.
What management does:
First, the numbers:
|
Margins % |
7/04 |
10/04 |
1/05 |
4/05 |
7/05 |
10/05 |
|---|---|---|---|---|---|---|
|
Gross |
47.6 |
47.1 |
45.7 |
44 |
42.1 |
40.5 |
|
Op. |
5.6 |
4.4 |
3.4 |
2 |
0.5 |
(1.2) |
|
Net |
3.3 |
2.6 |
1.9 |
1.1 |
0.2 |
(0.8) |
However, kudos are due to Sharper Image's management for cutting its own paychecks while its shareholders are suffering. In February, the company's CEO, COO, and other high-level officers and directors took paycuts ranging from 2% to 50% of base salary. Now, even the largest of these paycuts, the $500,000 docking of the CEO's salary, is immaterial, amounting to less than 0.1% of the company's annual revenues. But as a symbolic step to show that management "cares," it's laudable.
One Fool says:
The margins you see above tell a pretty bleak story -- but one that has already happened. What signs should Fools look to see if things might be improving? I'd suggest watching the company's performance in moving inventories. Once those start to drop, it will suggest that management has a better handle on what stuff sells, which should lead to building and selling more of it. Over the last six months, Sharper Image's sales have declined 14% year over year, while inventories have climbed 14%. Tomorrow, check and see whether that 28% divergence is starting to narrow.
Competitors:
- 3M (NYSE:MMM)
- Honeywell (NYSE:HON)
- Nautilus (NYSE:NLS)
- Salton (NYSE:SFP)
- RadioShack (NYSE:RSH)
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Fool contributor Rich Smith does not own shares of any company named above.
