Lillian Vernon Cuts Staff by 25%

It wasn’t a very merry holiday at gifts and housewares cataloger Lillian Vernon. The Virginia Beach, VA-based company laid off about 25% of its full-time workforce on Dec. 20. After the layoffs, which included a few employees based in the company’s former headquarters in White Plains, NY, Lillian Vernon’s total staff hovers around 500.

The staff cuts were in response to several factors, says company president/CEO Michael Muoio. “The most damaging was the postal rate increase of 20%,” he notes, plus the parcel carrier rate increase of 25%. “Basically, Fed Ex and the U.S. Postal Service reached down into our pocket and took out $8 million,” he says. “For us, there was no choice.”

The decrease in value of the U.S. dollar, also played a role, says Muoio. And although 2007 fall sales were better than 2006 fall sales, results did not meet the company’s plan. “We were hopeful with our fall activity that these things would all pan out, but we have to react,” he says.

Lillian Vernon has been privately held since Direct Holdings purchased it in July 2003, but during its final years as a public company, its revenue was $287.0 million for fiscal 2001, $259.6 million for fiscal 2002, and $238.0 million for fiscal 2003. In August 2006, Muoio told MULTICHANNEL MERCHANT that sales were in the range of $180 million.

While the company has performed well under Muoio’s direction, escalating costs continue to erode the bottom line. As a result, he says, “We just have to become a smaller business. We might be in front of the curve, but I think there will be a lot of this.” In particular, he believes that “a whole lot of $20-$30 million catalogers will be pressed.”

But Muoio believes that Lillian Vernon will weather the difficult catalog climate. “We’re changing everything now, restructuring completely from top to bottom as far as circ plans,” the Website, and other aspects of the multichannel merchant. The business has shrunk, he notes, but “we’re going to recover.”

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