The decision to reduce new store openings was compelled by poorfinancial performance and a need to reduce capital expenditures.Fiscal 2005 was the first year since 1990 that Sharper Image posteda net loss. For the year, the retailer lost $15.6 million, or $1.03per share, compared to last year's $14.7 million, or 90 cents pershare.

"2005 was a difficult year," said Richard Thalheimer, SharperImage founder, chairman and CEO during the chain's earningsconference call. He blamed much of the poor performance ondisappointing sales of the Ionic Breeze Air Purifiers and massagechairs. These products accounted for a $126-million net revenuedecrease in 2005 compared to the prior year.

Revenues and comp-store sales were also disappointing. Revenuesdecreased 12% to $669 million from last year's $760 million.Comparable store sales decreased 16%, while total catalog/directmarketing sales decreased 33% and internet sales decreased 8%.