Sharper Image, Lillian Vernon to close shop

NEW YORK -- Two catalog retailers, Sharper Image Corp. and Lillian Vernon Corp., have filed for Chapter 11 bankruptcy protection, hurt by falling sales and worsening credit market conditions.

Sharper Image, who shares lost more than 70 percent of their value Wednesday, filed for protection Tuesday with the U.S. bankruptcy court in Wilmington, Del., after three years of losses and litigation involving its Ionic Breeze air purifiers. The company plans to shut 90 of its 184 stores after clearing out inventories.

The San Francisco-based company said it had $251.5 million in assets and $199 million in debt as of Jan. 31, but just $700,000 of cash on hand, according to court records.

Lillian Vernon, whose products include giftware, housewares and children's products, filed for protection Wednesday in the same court. The closely-held, Virginia Beach, Va.-based company said it had between $1 million and $100 million of both assets and debts, court records show.

"We do expect a significant increase in business bankruptcies," said Richard Hastings, an economic adviser specializing in retailing for the Federation of Credit and Financial Professionals in South Plainfield, N.J. "A hit to consumer expenditures is exacerbating weakness in many consumer and retailing businesses. We expect this cycle to persist, easily, for 18 months."

Sharper Image said it has suffered from increased competition, narrowing margins, lower consumer and market confidence, tighter credit from suppliers and poorly performing stores. It also reported "negative publicity" from lawsuits over its Ionic Breeze air purifiers. The company is seeking a $60 million loan arranged by Wells Fargo Retail Finance LLC.

Lillian Vernon Chief Financial Officer Robert Eveleigh said in a court filing his company suffered steady sales declines and rising costs over the last decade.