Sharper Image Corp., the San Francisco specialty retailer, said Tuesday it has removed Chief Executive Officer Richard Thalheimer in a bid to turn around its flagging fortunes.

He is being replaced by Jerry Levin, a former chief executive at several companies who is known for reviving struggling brands. Levin will serve for one year while the board of directors searches for a permanent replacement. Thalheimer, who founded the company in 1977, will remain on the board.

Sharper Image did not elaborate on its decision to remove Thalheimer. The action, though, was not a complete surprise given his waning influence and growing discontent among investors.

In March, the Knightspoint Group, including Levin, bought a 12.8 percent stake in Sharper Image and threatened a proxy fight. The investors eventually relented and settled for three spots on the board, including one for Levin.

The near revolt highlighted Sharper Image's deepening financial struggles. In the quarter ended July 31, overall sales were down 24 percent from the previous year while same-store sales were down 28 percent.

The company has been hit hard by declining sales of some of its most popular and profitable products, such as the Ionic Breeze, a proprietary air-filtering device that was once highly profitable.

Sharper Image also acknowledged recently that it is must restate its results after it admitted mishandling stock compensation for employees.

It's unclear what immediate effect the change at the top will mean. Levin is known as a turnaround artist after serving as chief executive at Revlon Inc. and American Household Inc., formerly Sunbeam.

Analyst Richard Weinhart with BMO Capital Markets said the company will have to undertake some serious moves, which may include closing stores and distribution centers.

"The cost structure for the company is too large," said Weinhart. "The system is built for a certain level of revenue including the Ionic Breeze that doesn't exist anymore. There is a need for a significant restructuring."

Joan Storms, an analyst with Wedbush Morgan Securities, said the company will need to find in-house products to push up profits again.

"They have to shore up the proprietary Sharper Image design process and the pipeline," Storms said. "Those are higher margin products and they need those to make their model work."

Shares of Sharper Image climbed 10.2 percent on the news Tuesday, finishing up 96 cents at $10.33 per share. 

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