Shares of Sharper Image Corp. (SHRP), the personal and home electronics retailer, dropped as much as 16 percent Friday, a day after it forecast a first-quarter loss and declining sales.

Company Chairman and Chief Executive Richard Thalheimer (search) told analysts in a conference call late on Thursday that lackluster product introductions were hurting results.

Claire Gallacher, an analyst at Caris & Company, called the company's outlook "dismal", and downgraded her investment rating on the stock to "sell" from "average."

"We would advise investors to use Sharper Image shares as a source of cash until we have further visibility into a more promising product pipeline," she said in a research report.

Sharper Image shares were down $2.35 at $14.59 on Nasdaq (search), after earlier dropping to a 2-1/2-year low of $14.08.

Sharper Image, based in San Francisco, said it expected to post a loss between 28 cents and 32 cents a share for the quarter ending April 30, compared with a year-ago profit of 13 cents a share.

It said comparable-store sales, or sales at stores open at least a year, would decrease in a percentage rate in the low teens and forecast that total sales would decline in the high-single digits.

According to Reuters Estimates, analysts had expected the company to break even in the first-quarter.

Sharper Image -- whose exclusive products until recently had seemed immune to competition from gadgets sold at rival chains like RadioShack Corp. -- forecast a profit for the fiscal year ending January 2006 of 60 cents to 95 cents a share.

It forecast a decline in same-store sales for the full year in the mid- to high-single digits, and forecast that total sales would range from a decrease in the low-single digits to an increase in the low-single digits.

Analysts had expected the company to earn $1.12 a share for the year

CEO Thalheimer on Thursday also said that rising freight costs were hurting results.