Richard Thalheimer, the founder, chairman and CEO of SharperImage termed the results "disappointing" but said that comparablestore sales were "in line with our guidance of negative mid-singledigits." The company "lost some potential sales gains" by nothaving enough of some key holiday items in stock, Thalheimer said,adding that store traffic was lighter than officials hadanticipated, especially in the 10 days leading up to Christmas Day.Other contributing factors to the holiday sales results includedhigher freight costs and a slight change in the merchandise mix tolower-margin items, Thalheimer said.

While the company lowered its earnings expectations on the basisof the sales report, it said it is confident in its overallstrategy and plans to increase the number of new stores in its177-unit chain by 15% to 20% in 2005. Thalheimer said the companywill undertake "a critical review of our expense structure" andwill control discretionary spending while continuing to develop newproducts to introduce in the summer and the fall.

The Sharper Image sales report followed a November report inwhich the company's sales increased 17% to $78.9 million inNovember, compared with $67.3 million in November 2003 butcomparable store sales decreased 3% in the same period. The loweredearnings guidance for the fourth quarter now estimates net profitat 94 cents to 99 cents per share, compared with $1.40 in lastyear's fourth quarter. For the full year, the estimate is now 90cents to 95 cents per share, compared to last year's earnings of$1.65 per share.