Lillian Vernon Corp. Business Information, Profile, and History

History of Lillian Vernon Corp.

The Lillian Vernon Corporation is a mail-order catalog company specializing in household, gardening, and decorative merchandise as well as gifts and children's products. Offering simple and practical merchandise, Lillian Vernon's catalogs have become a fixture in American pop culture, having gained mention on such television programs as Northern Exposure, Roseanne, and Jeopardy. Although the company went public in 1987, Lillian Vernon remained essentially a family-run company, with its founder Lillian Vernon acting as CEO, and her sons David and Fred Hochberg acting as vice-president of public affairs, and president and chief operating officer, respectively. Fred Hochberg left the company in 1992.

In 1994, Lillian Vernon's circulation of over 150 million encompassed five different catalogs: Lillian Vernon's original catalog, Welcome (targeted to people who had recently moved) Lilly's Kids, Christmas Memories, and sale catalogs. An additional catalog, Lillian Vernon's Kitchen, was introduced in February 1995, boosting circulation once again. Lillian Vernon purchased its products directly from companies in the United States as well as in Paris, London, Milan, and Hong Kong. It also maintained a wholesale division, Lillian Vernon Special Markets, which sells gifts and other products personalized with company names on logos. Although Lillian Vernon boasted Hillary Clinton, Tipper Gore, Frank Sinatra, and Loretta Lynn among its clientele, the majority (over 90 percent) of its customers were women with an average household income of $53,000. Over half worked outside the home and had children living at home.

Lillian Vernon Corporation was founded in 1951 under the name Vernon Specialties. The name was taken from founder Lillian Vernon's home in Mount Vernon, New York. At that time, Vernon was 22 years old, recently married, pregnant, and looking for a business she could run from her kitchen table. Using part of the $2,000 she and her husband had received as wedding gifts, Vernon took out a $495 advertisement in Seventeen magazine offering monogrammed leather handbags and belts for $2.99 and $1.99, each. The leather goods were purchased from Vernon's father, who ran a small leather factory. The 24-karat gold monograms were purchased from a distributor and hand-applied on the goods by Vernon herself.

Vernon received $32,000 worth of orders from her first ad. She then used her profits to buy ads in other popular women's magazines. Sales grew, and, within a few years, the company landed several contracts to manufacture custom-designed products for corporations, including Max Factor, Elizabeth Arden, Avon, and Revlon. In 1954, Vernon Specialties moved out of Vernon's kitchen and into three facilities in Mount Vernon in order to meet the growing demand for its products.

Two years later, in 1956, Vernon Specialties mailed its first catalog to the 125,000 customers who had responded to the company's magazine ads since 1951. The catalog had sixteen pages of black-and-white photos offering items such as signet rings, combs, cuff links, and blazer buttons--all of which could be personalized through the company's free monogramming service.

In fact, the key to Vernon Specialties' early success in the mail-order business was its offer of free monogramming, which continued as one of the features that distinguished the company from its competitors in the mid-1990s. Within a few years of its debut, the catalog was expanded by Vernon to include products for the home. She personally chose every product featured in her catalogs and had an "uncanny knack" for judging the needs and desires of middle-class housewives. Based on her own experiences, she knew that housewives required well-built products at reasonable prices. Although products were bought from a variety of manufacturers, most were customized under the Lillian Vernon name. As proof of the quality of its products Lillian Vernon offered a 100 percent money-back guarantee, which stated that "customers can return a product even ten years after it has been purchased."

Vernon Specialties' catalog was quite successful in its first decade, and sales continued to increase. In 1965, the company changed its name to Lillian Vernon Corporation. Sales were given an added boost in 1968, when Lillian Vernon introduced personalized Christmas ornaments in its catalogs. This product line would grow so popular that over 75 million ornaments would be sold by 1994. In 1970, the company's annual sales hit $1 million.

Sales continued to grow moderately throughout the 1970s. In 1978, as a response to the growing number of catalog customers interested in retailing Lillian Vernon products in their own stores, the company established its Provender wholesale division. Provender provided retailers with Lillian Vernon's own line of imported toiletries, fancy foods, and kitchen textiles, such as towels, aprons, and pot holders. Around that time, the company also opened The New Company, a wholesale manufacturer of brass products headquartered in Providence, Rhode Island.

In 1982, sales jumped again when the company introduced its first sale catalog offering overstocked merchandise at prices up to 75 percent off the original retail prices. Due largely to the success of its sale catalogs, Lillian Vernon posted record revenues of $75 million in 1983. The following year, Lillian Vernon introduced a line of private-label, exclusively designed home organization products in its catalog, a line that grew to represent 25 percent of business within ten years. In 1985, the company streamlined its operations by incorporating its Provender division into the main wholesale division.

The mail-order industry grew by leaps and bounds in the 1980s, with the number of people ordering merchandise by phone or mail increasing 70 percent between 1982 and 1992. Small, specialty catalogs like Lillian Vernon entered the market in full force, taking sales away from traditional mail-order giants like Sears and Montgomery Ward.

By 1987, Lillian Vernon was mailing out 80 million catalogs a year. The company went public that year, with an initial offering of 1.9 million shares on the American Stock Exchange. Proceeds for the offering were used to construct a state-of-the-art National Distribution Center in Virginia Beach, Virginia. That year, net income totaled $4.4 million on revenues of $115.5 million. The following year, net income grew to $6.9 million on revenues of $126 million.

Expansion continued with the 1989 addition of a computer center at the company's National Distribution Center. That year, Laura Zambano was named to the position of senior vice-president, general merchandise manager, taking over many of the merchandising responsibilities from Vernon. Also that year, the company opened its first outlet store near its Virginia Beach distribution center. The company made an attempt to further diversify its product offerings by introducing a high-end home furnishings catalog, which ultimately was incorporated into the company's other catalogs.

The following year, however, Lillian Vernon introduced the highly successful Lilly's Kids, catalogs specializing in toys, games, and personalized gifts for children. Sales hit $162 million, in 1991 with profits of $9.5 million. A new customer service center was opened in Virginia, as were two new outlet stores; one in a suburb of Washington, D.C. and the other in Williamsburg, Virginia.

Lillian Vernon was able to stay on top of the booming catalog industry by constantly introducing new products and by keeping prices reasonable. As the company entered its fourth decade, the average price of a product was $17 and the average customer order totaled $39. In 1992, the company declared its first quarterly dividend of $0.05 per share. That year, it also introduced its Christmas Memories catalog, specializing in Christmas ornaments and holiday decorations for the home. By 1992, Lillian Vernon was adding over 1,000 new products a year to its four catalogs and had three more outlet stores in Virginia and New York State.

In 1993, Lillian Vernon launched its Welcome catalog, offering home organization products and decorative accessories for people who had recently moved to new homes. 1993 net income totaled $12.8 million on revenues of $196.3 million.

Although the catalog/direct marketing industry boomed in the 1980s, cyclical downturns are inevitable. Company management regarded increased specialization and diversification of its catalogs as essential to success in this rapidly changing environment. In response to increased competition, Lillian Vernon began test-mailing its catalogs in Canada and also began investigating other foreign markets. The company offered products on television's QVC Shopping Network, and Vernon personally appeared on Joan Rivers' television shopping program in 1994.

In another effort to keep on top of trends in the direct marketing industry, Lillian Vernon became one of 39 catalogs to be featured on The Merchant, one of the first CD-ROM shopping discs.

As Lillian Vernon approached its fiftieth anniversary, the company seemed intent on expansion. It launched another specialized catalog in February 1995 offering cookwear, cutlery, table accessories, gourmet gifts, and small electric appliances. Two months later, it launched a special section in its core catalog featuring luggage and travel accessories. The company began selling its products through the Prodigy online service, and was also looking into further growth through acquisitions and expansion of its corporate gift, premium, incentive, and gift certificate markets.