Upscale retailer Sharper Image is closing all of its retail stores and liquidating $50 million in inventory, though it will live on as an online, catalog and direct-to-retail brand.

Sharper Image filed for Chapter 11 bankruptcy protection in February, a victim of retail trends and a losing libel suit. The company had mounted an expensive libel action against Consumer Reports, over the magazine's reporting on Sharper Image's signature product, the Ionic Breeze air cleaner.

The company said the "transformation of the Sharper Image brand" will be led by Hilco Consumer Capital, LLC, Gordon Brothers Brands, LLC and additional joint venture partners.

The Hilco/Gordon partnership group, which purchased the Sharper Image brand at a bankruptcy auction on May 29, 2008, has developed a global licensing strategy for wholesale, retail, direct-to-retail, e-commerce and catalog businesses that will "exploit The Sharper Image's heritage of quality, excitement, innovation and fun," the company said in a statement.

Despite closing all the retail stores, the company says the Sharper Image brand will be extended internationally in both existing and new product categories. It says steep discounts of 20 to 40 percent are now being offered on all remaining merchandise in all stores.

For the last few years, Sharper Image has suffered from a lack of liquidity, stemming from its legal action.

The trouble began in 2003 when Consumer Reports published a report claiming the expensive Ionic Breeze air cleaners don't clean air. The magazine later claimed its tests showed that Sharper Image's Ionic Breeze Quadra Silent Air Purifier and four other units also release potentially unhealthy levels of ozone.

Not only did the company lose the lawsuit against Consumer Reports, investors mounted a class action suit against Sharper Image, claiming fraud.

Consumers complain

Besides angry investors, the company faced the wrath of consumers turned off by problems with the devices.

"I purchased two Ionic Breeze Quadras about 9 years ago to help with my allergies and asthma," Victoria, of Cambria, California told ConsumerAffairs.com last year. "It was only recently I read some information that the ozone emitted from these air 'purifiers' could worsen asthma symptoms and I decided to shut mine down.

"My asthma had been getting progressively worse for years, and now, after only 2 days of this thing being off, I have noticed a dramatic reduction is my symptoms," she said. "I do not know yet if the damage to my lungs is permanent, but for the first time in at least a year, I can take a deep breath without coughing and I don't wake up every two hours needing to use an inhaler."

The company has experienced steadily falling sales since 2004, and has reported net losses in the last three years. In court papers, Sharper Image blamed its woes, in part, on negative publicity surrounding the Ionic Breeze.

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