Lilly’s Kids Onesies on the Way?

Lillian Vernon is relinquishing her duties as chief executive of the company she founded in 1951. But the catalog doyenne will still have a say in its direction.

Vernon on Feb. 28 asked Lillian Vernon Corp.’s board of directors to start searching for a new chief executive. According to spokesperson David Hochberg, she will remain chairman/CEO until a replacement is found.

Instead of overseeing day-to-day operations of the $287 million multititle mailer, the 74-year-old Vernon will devote her energies to launching products through licensing deals, similar to what Martha Stewart has accomplished by lending her name and expertise to various products.

Hochberg says the Rye, NY-based Lillian Vernon Corp. has retained a well-known licensing firm (he wouldn’t reveal the firm’s name) to study its merchandising prospects and set up the deals. “There’s a lot of opportunity for us,” he says. For instance, the Lilly’s Kids title could be used to brand a line of children’s clothing or furniture. The company’s other titles include Lillian Vernon Gardening, Christmas Memories, and Personalized Gifts.

Its biggest asset

Followers of the gifts and home products cataloger applaud the licensing move. “I’m surprised that they haven’t done this before,” says Ken Gassman, senior research analyst at Richmond, VA-based investment bank Davenport & Co. “This is a well-recognized brand, especially among its female consumers.”

Of course, for a licensed brand to succeed, it has to stand for something. The average consumer knows what Martha Stewart stands for. But what about Lillian Vernon?

“It stands for low-priced gift merchandise,” Gassman says. “If you attach Stewart’s name to something, people trust her. I think that Lillian has that same high level of trust among consumers.”

Lillian Vernon Corp. clearly hopes that such trust translates into greater sales. For its fiscal third quarter, ended Nov. 24, sales were $87.0 million, down 16% from $104.1 million for the previous third quarter. Of course, the events of Sept. 11 contributed to much of the decline, as did a 6% cut in circulation. The company will report fourth-quarter and full-year results later this month.

“This new merchandising initiative should help them grow the top line,” suggests Derek Leckow, senior investment analyst at Chicago-based investment bank Barrington Research Associates. “The Lillian Vernon brand is a well-known name and is certainly one of the company’s biggest assets.”

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