THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Tuesday, October 3, 1995 TAG: 9510030285
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY STEPHANIE STOUGHTON, STAFF WRITER
LENGTH: Medium: 70 lines
Lillian Vernon Corp., the New York-based specialty catalog retailer, said Monday it will spend $36.8 million expanding its national distribution center in Virginia Beach.
``The facility has been there for seven years,'' company spokesman David Hochberg said. ``We knew it was too small and we needed more space. It's definitely time for expanding. We need the space to grow the business.''
Workers will break ground this month, adding 335,000 square feet to the existing 486,000-square-foot facility near Lynnhaven Mall. They expect to complete the project by the summer of 1997.
Once the building is finished, Lillian Vernon will add 300 full-time jobs and 700 seasonal positions. The distribution center, located off International Parkway in the Oceana West Corporate Park, now has 700 full-time workers and 3,700 seasonal employees.
Economic development officials handed out several incentives. The state, for example, offered job training and about $200,000 in tax credits over three years, said Morgan Stewart, a spokesman for the Virginia Department of Economic Development. A $100,000 state grant has been approved for the city, which will use it for site improvements.
For its part, the city gave Lillian Vernon 10 acres of land valued between $600,000 and $700,000, said Mark R. Wawner, project development manager for the city's economic development department. Virginia Beach also sped up road improvements to accommodate extra traffic leading to the company's distribution center.
Monday's announcement was good news to economic development officials, who had fretted while the project was in limbo. The proposed expansion was first a definite deal and then set aside.
An investment firm that agreed to buy Lillian Vernon promised to build the new facility, but the deal fell through last month. At that time, Lillian Vernon said it needed to reassess the project. Last week, the company's board of directors approved the expansion.
The expansion comes at a difficult time for Lillian Vernon. Although the company's revenue is up, catalog paper prices have skyrocketed by more than 50 percent, and the company has recently experienced losses.
In the second quarter ended Aug. 26, the New Rochelle, N.Y.-based company lost $498,000, compared with a $774,000 profit in the previous year's quarter. Much of the loss was due to higher paper costs and $1 million in expenses associated with its failed acquisition by Los Angeles-based Freeman Spogli & Co. The deal fell through after lowered earnings projections derailed financing efforts.
Lillian Vernon's sales rose almost 10 percent to $36.9 million during the second quarter from $33.7 million in the year-earlier period.
Lillian Vernon, who founded the company in 1951, said she was pleased by her firm's performance.
``In a difficult retailing environment, we increased our first-half revenues significantly compared to last year,'' said Vernon, chairman and chief executive officer.
She added that the company has successfully launched a new specialty catalog, Lillian Vernon's Kitchen, and has increased its average order size and sales per catalog. To offset higher paper costs, the retailer has managed its circulation with more focused, targeted mailings, Vernon said.
Vernon started her company 44 years ago by placing a $495 advertisement for a personalized purse and belt in a magazine. The company now boasts more than $200 million in annual sales, offering everything from Christmas gifts to gardening products in its catalogs and stores. by CNB