LENOX GROUP INC. REPORTS SECOND QUARTER 2007 RESULTS

August 7, 2007 – Eden Prairie, MN – Lenox Group Inc. (NYSE: LNX), a leading tabletop, giftware and collectible company, today reported financial results for its second quarter ending June 30, 2007.

Summary of Results from Continuing Operations

Revenues for the second quarter were $93.0 million compared to $98.4 million in the second quarter of 2006, reflecting declines of $3.0 million, $1.3 million and $0.8 million in the Company’s Wholesale, Retail and Direct segments, respectively. Revenues for the first six months were $179.4 million compared to $189.2 million in the same period of 2006.

The net loss for the second quarter was $11.3 million, or $0.82 per share compared with a net loss of $41.2 million, or $3.00 per share in the second quarter of 2006. The net loss for the first six months was $24.3 million, or $1.76 per share compared to a net loss of $48.3 million, or $3.51 per share in the prior year.

Marc Pfefferle, interim Chief Executive Officer said, “These results are consistent with our expectations that the residual effects of the market and sourcing issues faced in 2006 would result in lower revenues, but that the impact on our profitabilityimpact would be significantlylargely negated byas a result of our restructuring programs. We have made substantial progress in implementing the plan approved by the Board in March. Through the first half This plan calls for increasing improvement relative to last year as the year progresses and through the first half of the year we are slightly ahead ofahead of thisis on this plan, which . This plan calls for increasing improvement in 2007 relative to last year as the year progresses.”

“ [We have been led by a strong {better than planned} performance by our Wwholesale segment. This has been offset somewhat by the Rretail segment which has been slow to transition back to a normalized level of 1st quality product sales. which has hurt our revenue and gross margin. We were also are behind our plan in the Direct segment.channel, which was negatively affected in the beginning of the year by product availability. We will focus on bBoth of these segments will be a focus as we approach the fourth quarter, their most important holiday seasonpart of the year.]”

The comparability of the net loss for the first six months of 2007 to the same period in 2006 was affected by a number of factors. The first six months of 2007 included a $5.9 million loss on refinancing of debt, comparability of the net loss for the first six months of 2007 to the same period of 2006 was likewise affected by by the items mentioned in the previous paragraphthese and other non-recurring factors, including :, as well as a tax benefit recognized during the first quarter of 2007. Contributing to the net loss during the first six months of 2007 was a $5.9 million loss on refinancing of debt, $6.9 million of restructuring costs and $2.7 million of executive management consulting fees, partially offset by a separate $1.8 million after tax benefit as a result of the expiration of the statute of limitations on certain tax positions the Company had taken. The first six months of 2006 was negatively affected by a the 2nd quarter goodwill impairment charge of $37.1 million, partially offset by a favorable purchase accounting adjustmentbenefit of $3.5 million. Excluding the aforementionedthese non-recurring items and their related tax effect, the net loss for the first six months of 2007 was $16.7 million or $1.21 per share compared to a net loss of $14.8 million or $1.08 per share during the same period of 2006.

The presentation of the net loss and net loss per share in the last sentences of the previous two paragraphs are non-GAAP measures. Management believes these non-GAAP measures provide useful information to investors regarding the Company’s results because it provides a more meaningful comparison and understanding of the Company’s operating performance compared to last year. These non-GAAP measures should not be considered an alternative to the results from operations which are determined in accordance with GAAP. A reconciliation of the GAAP financial measures to the non-GAAP financial measures is as follows:

 

Mr. Pfefferle continued, “We have come a long way, in a short period of time, but recognize there is still a great deal of work to be accomplished. We have reduced the cost structure of the business and will continue to strive to increase the efficiency of the Company. At the same time, we are very excited with the progress we have made in our efforts to repositioning Dansk, which will be unveiled in the October market, and in to strengthening our Lenox, Gorham and Department 56 brands.. We have also dramatically increased the speed and effectiveness of our product development which will be evident in demonstrated by our Lenox and Gorham offerings in October. In addition, the Kinston manufacturing facility is operating much more efficiently, making it more competitive with off-shore facilities.”

Second Quarter Performance
Wholesale Segment

Net sales decreased $3.0 million, or 4%, in the second quarter of 2007 compared with the same period in 2006. The decrease was due to lower sales of Dansk and Gorham branded products, partially offset by an increase in Department 56 branded products. Sales of Lenox branded products were largely flat with last year.

Gross profit as a percentage of net sales was 42% in both the second quarter of 2007 and 2006, respectively. Improvements in product mix were offset by a higher provision for excess inventory.

Selling expenses were $1.1 million or 11% lower in the second quarter of 2007 as compared to the second quarter of 2006. This decrease in selling expenses was principally due to lower advertising expense and workforce reductions.

In the second quarter of 2006, a goodwill impairment charge of $37.1 million was recorded to write-down the goodwill related to the Department 56 wholesale reporting unit.

Restructuring charges of $0.1 million in the second quarter of 2007 were primarily severance related charges as a result of the continued execution of the Company’s new business plan.

Retail Segment
Net sales decreased $1.3 million, or 12%, in the second quarter of 2007 compared with the same period in 2006. This decrease was primarily due to a 13% reduction in same-store sales, caused in significant part by the delay in transitioning to an appropriate go forward merchandising assortment.

Gross profit as a percentage of net sales was 42% and 60% in the second quarter of 2007 and 2006, respectively. The 18 percentage point decrease was principally due to 2007 having a larger mix of second quality and excess inventory sales than in 2006. The Retail segment continues its efforts to transition to a merchandising strategy that includes an appropriate mix of historical level of 1st quality product sales which, if successfully executed, should increase gross margins back to historic levels.

Selling expenses increased $0.3 million or 5% in the second quarter of 2007 compared to the second quarter of 2006. The increase in selling expenses were principally due to asset disposal charges related to a change in store merchandising strategy.

Restructuring charges of $0.6 million in the second quarter of 2007 were principally due to lease termination costs related to the termination of an All The Hoopla store lease and severance related charges as a result of the continued execution of the Company’s new business plan.

Direct
Net sales decreased $0.8 million or 5% in the second quarter of 2007 as compared to the same period in 2006. The decrease was primarily due to the residual effect of fewer new product promotions in the beginning of the second quarter of 2007 compared to the same period in 2006 caused bydue to delays in developing and sourcing new product experienced during the first quarter, as well as continued lower customer response rates, which the Company believes it has now significantly addressed.

Gross profit as a percentage of sales was 69% and 67% in the second quarter of 2007 and 2006, respectively. This two percentage point improvement in gross profit as a percentage of sales is primarily the result of improved product mix and lower freight costs.

Selling expenses increased by $0.6 million or 6% in the second quarter of 2007 compared to the second quarter of 2006 due primarily to increased media spending to acquire new customers and higher bad debt charges.
Restructuring charges of $0.2 million in the second quarter of 2007 were severance related charges as a result of the continued execution of the Company’s new business plan.

Corporate
Net sales of $0.3 million represents revenue from the licensing of the Lenox brand and were $0.3 million lower in the second quarter of 2007 compared to the same period in 2006.

General and administrative expenses decreased by $2.9 million or 11% in the second quarter of 2007 as compared to the same period in 2006. This decrease was primarily a result of a $ 1.8 million reduction in post-retirement expenses related to the decision in the fourth quarter of 2006 to freeze the Company’s defined benefit pension plans and to discontinue offering post-retirement health benefits to current employees, $1.8___ million in headcount and otherworkforce reductions and $0.5 million in savings in integration expenses associated with the Willitts acquisition incurred in the second quarter of 2006. Partially offsetting these cost reductions was $1.2 million in executive management consulting fees incurred in 2007.

Restructuring charges of $1.2 million in the second quarter of 2007 were severance related charges as a result of the continued execution of the Company’s new business plan.

Loss on refinancingthe early extinguishment of debt
The Company incurred a $5.9 million loss on the early extinguishment of debt related to the refinancing of its term and revolver loans in the second quarter of 2007. This loss consisted of $2.7 million of costs incurred in the quarter related to the re-financing as well asand the write-off of $3.2 million of previously capitalized loan costs.

Provision for Income Taxes
The effective income tax rate was a 39% benefit in the second quarter of 2007 compared to an 11% benefit in the second quarter of 2006. The low 2006 effective income tax rate was principally due to the goodwill impairment (which wasis primarily non-tax deductible),

Year to Date Performance

Wholesale
Net sales decreased $4.5 million, or 4%, in the first half of 2007 compared with the same period in 2006 primarily due to sales decreases in Dansk, Gorham and Department 56 branded products, partially offset by a small increase in Lenox branded products..

Gross profit as a percentage of net sales was 40% and 43% in the first half of 2007 and 2006 respectively. The three percentage point decline in gross profit percentage was primarily due to higher levels of unfavorable manufacturing variances related to lower production volumes at the Company’s silver manufacturing facility and a higher level of product liquidations through the wholesale channel during the first six months of 2007 as compared to the same period in 2006, which had an impact of two and one percentage points respectively.

Selling expenses were $2.8 million or 15% lower in the first half of 2007 compared to the same period in 2006. This decrease in selling expenses was principally due a reduction in base and incentive compensation costs resulting from workforce reductions and reduction in variable costs as a result of lower sales.

In the first half of 2006, a goodwill impairment charge of $37.1 million was recorded to write-down the goodwill related to the Department 56 wholesale reporting unit.

Restructuring charges of $0.7 million in the first half of 2007 were primarily severance related charges as a result of the continued execution of the Company’s new business plan.

Retail
Net sales decreased $1.2 million, or 4%, in the first half of 2007 compared with the first half of 2006. This decrease was primarily due to the closure of 28 Lenox retail stores throughout the first quarter of 2006, partially offset by an increase of 3% in same-store sales in 2007. . Same store sales in 2007 increased 16% during the first quarter driven by inventory liquidation sales and decreased 13% in the second quarter caused in significant part by the delay in transitioning to an appropriate go forward merchandising assortment.

Gross profit as a percentage of net sales was 34% and 66% in the first half of 2007 and 2006, respectively. This thirty two percentage point decrease was partially due to a purchase accounting adjustment to value Lenox inventory at its estimated selling price less cost of disposal under the purchase method of accounting on the opening balance sheet date. The impact of this purchase accounting adjustment during the first half of 2006 was approximately $4.5 million, which increased gross profit as a percentage of sales by 17 percentage points from 49% to 66%. In addition, gross profit as a percentage of sales was lower in 2007 due to promotions aimed at liquidating excess and 2nd quality inventory during the first quarter, as well as the impact of selling a higher percentage of excess and 2nd quality products during the second quarter of 2007 than in 2006.

Selling expenses decreased $0.6 million or million or 4% in the first half of 2007 compared to the same period in 2006. The decrease in selling expenses was principally due to a reduction in variable selling expenses.

Restructuring charges of $1.0 million in the first half of 2007 were related to lease termination and other store closure costs relating to two store locations as well as severance related charges as a result of the continued execution of the Company’s new business plan.

Direct
Net sales decreased $4.1 million or 10% in the first half of 2007 as compared to the same period in 2006. The decrease was primarily due to fewer new product promotions during the first quarter and in the beginning of the second quarter of 2007 compared to the same period in 2006 caused bydue to delays in developing and sourcing new product, which the Company believes it has now significantly addressed. In addition, the Direct sSegment experienced lower customer response rates on product that was promoted in 2007.

Gross profit as a percentage of sales was 67% and 66% in the first half of 2007 and 2006 respectively. The gross profit percentage of 66% in the first quarter of 2006 was negatively affected by a purchase accounting fair market value adjustment related to the write up of inventory to its estimated selling price less cost of disposal under the purchase method of accounting on the opening balance sheet date. The impact of this purchase accounting adjustment was $1.2 million, which decreased gross profit as a percentage of sales by three percentage points for the first quarter of 2006 from 69% to 66%. The decrease in the gross profit percentage in 2007, when compared to the 69% in 2006, was primarily due to higher provisions for excess inventory.

Selling expenses increased by $1.6 million or 8% in the first half of 2007 compared to the first half of 2006 due primarily to increased media spending to acquire new customers and higher bad debt charges related to a change in sales mix.

Restructuring charges of $0.2 million in the first half of 2007 were severance related charges as a result of the continued execution of the Company’s new business plan.

Corporate
Net sales of $0.9 million in the first half of 2007 represents revenue from the licensing of the Lenox brand and was flat compared with the first half of 2006.

General and administrative expenses decreased by $5.8 million or 10% in the first six months of 2007 as compared to the same period in 2006. This decrease was primarily a result of a $ 3.6 million reduction in post-retirement expenses related to the decision in the fourth quarter of 2006 to freeze the Company’s defined benefit pension plans and to discontinue offering post-retirement health benefits to current employees and $4.9___ million in headcount and otherworkforce cost reductions. Partially offsetting these cost reductions was $2.7 million in executive management consulting fees incurred in 2007.

Restructuring charges of $5.1 million in the first half of 2007 were principally severance expense related to the Company’s previous chief executive officer, lease buyout expense related to the shutdown of the Company’s Rogers distribution facility and general severance and other costs associated with organizational changes implemented as part of the Company’s new business plan.

Loss on refinancing the early extinguishment of debt
The Company incurred a $5.9 million loss on the early extinguishment of debt related to the refinancing of its term and revolver loans in the second quarter of 2007. This loss consisted of $2.7 million of costs incurred in the quarter related to the re-financing as well as the write-off of $3.2 million of previously capitalized loan costs.

Provision for Income Taxes
The effective income tax rate was a 43% benefit in the first half of 2007 compared to 16% benefit in the first half of 2006. The low 2006 effective income tax rate was principally due to the goodwill impairment (which wasis primarily non-tax deductible). Additionally, the 2007 tax benefit was increased due to the recognition of $1.8 million of previously unrecognized tax benefits, net of adjustments to deferred tax assets, due to the expiration of the statute of limitations on certain tax positions in the first half of 2007.

Conference Call Information
Lenox Group management will review the company’s 2007 second quarter results on a conference call beginning at 9:00 a.m. (EDT) on _____. August 8, 2007. Investors will have the opportunity to listen to a live Webcast of the conference call over the Internet at www.earnings.com. To participate, please go to the Web site at least 15 minutes prior to the start time to register and download and install any necessary software. A replay will be available at the same location after the call concludes for those who cannot listen to the live broadcast.

About Lenox Group Inc.
Lenox Group Inc is a market leader in quality tabletop, collectible and giftware products sold under the Department 56, Lenox, Department 56, Gorham, and Dansk brand names. The Company sells its products through wholesale customers who operate gift, specialty and department store locations in the United States and Canada, Company-operated retail stores, and direct-to-the-consumer through catalogs, direct mail, and the Internet.

Forward-looking statements
Any conclusions or expectations expressed in, or drawn from, the statements in this filing concerning matters that are not historical corporate financial results are "forward-looking statements", within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. These statements are based on management’s estimates, assumptions and projections as of today and are not guarantees of future performance. Such risks and uncertainties that could affect performance include, but are not limited to, the ability of the Company to: (1) integrate certain Lenox and Department 56 operations; (2) achieve revenue or cost synergies; (3) generate cash flow to pay off outstanding debt and remain in compliance with the terms of its new credit facilities; (4) successfully complete its operational improvements, including improving inventory management and making the supply chain more efficient; (5) retain key employees; (6) maintain and develop cost effective relationships with foreign manufacturing sources; (7) maintain the confidence of and service effectively key wholesale customers; (8) manage currency exchange risk and interest rate changes on the Company’s variable debt; (9) identify, hire and retain quality designers, sculptors and artistic talent to design and develop products which appeal to changing consumer preferences; and (10) manage litigation risk in a cost effective manner. Actual results may vary materially from forward-looking statements and the assumptions on which they are based. The Company undertakes no obligation to update or publish in the future any forward-looking statements. Also, please read the bases, assumptions and factors set out in Item 1A in the Company’s Form 10-K for 2006 dated March 15, 2007 and filed under the Securities Exchange Act of 1934, all of which is incorporated herein by reference and applicable to the forward-looking statements set forth herein.

Contact
Timothy J. Schugel
(952) 944-5600