The Sharper Image Files For Bankruptcy

The Sharper Image, sellers of many things shiny and cheaply constructed, has filed for chapter 11 bankruptcy in Delaware court:

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.

The Sharper Image has been suffering from 3 years of straight net losses, following a declaration by Consumer Reports that The Sharper Image's famous Ionic Breeze air purifiers are "ineffective" and "unhealthy."

Consumer Reports even went so far as to claim the Ionic Breeze purifiers "could expose users to lung-damaging levels of ozone."

Eventually, the claims by Consumer Reports led to a class action lawsuit by customers who felt they had been misled by The Sharper Image's advertising; the lawsuit was eventually settled, with customers getting store credit, even further cutting into The Sharper Image's bottom line.

All of this, coupled with increased competition and lower revenues led to The Sharper Image ordering products from suppliers on credit, and the bankruptcy filing comes at a time when those suppliers have been asking "where's our money?"

Frankly, I was never moved to buy anything from The Sharper Image due to the shoddy quality of many of their products, and from someone who loves shiny things, that's saying a lot.

I wonder if Brookstone is having the same issues with staying profitable in the age of Internet stores?