Following a 10% cut in circulation for the first half of the fiscal year, second-quarter sales for Rye, NY-based Lillian Vernon Corp. (Amex: LVC) fell 2%, from $36.8 million last year to $36.1 million this year. But the cataloger’s second-quarter net loss swelled from $3.4 million last year to $6.1 million for the three months ended Aug. 24. The multititle gifts and home products mailer says that the summer’s postal rate increase, the costs of implementing an incentive program for distribution center workers, and a $900,000 financing charge led to the increase in red ink.