Department 56, the venerable retailer known for collectible giftware and limited-edition Christmas decorations, was put on the selling block by its parent firm, Lenox Group.

Struggling Lenox said Monday that it is in "advanced discussions" regarding the sale of Department 56 after it was unable to find a buyer for all of Lenox, which includes Lenox and Dansk tableware and Gorham silver settings.

Lenox has been looking for financial suitors since January when its board hired Berenson & Co. to review strategic options "including a sale of the [entire] company, a sale of a portion of the company, and raising additional equity capital."

"While market conditions have hampered this process, Lenox is continuing to explore its strategic options," Lenox said in a statement.

The sale of Department 56 would take the retailer full circle from shopper to shopped three years after it bought Lenox for $205 million. The merged company, which took the Lenox name, has been the victim of lean economic times, particularly for higher-end items like fine china and crystal stem ware.

In May, Lenox was delisted from the New York Stock Exchange when its market capitalization fell below the $25 million minimum.

Lenox stock, which now trades in the over-the-counter market, closed Monday at 25 cents a share, a penny above its recent low of 24 cents a share reached last week.

Department 56, which replaced former CEO Susan Engel with turnaround specialist Marc Pfefferle 19 months ago, faces a daunting economic environment as both a retailer and a retailer with a for-sale sign on its door.

"The climate for getting capital to acquire a company, especially one that is not performing well, is getting very, very challenging," said Stan Pohmer, a Twin Cities retail consultant. "Lenders are getting pretty gun-shy unless it's a sure thing."

Pohmer also noted that much of Department 56's sales are driven by holiday purchases. "Everyone's predicting a tough fourth quarter and the luxury market is feeling some of the burn, too," Pohmer said.

In addition to potentially selling Department 56, Lenox said it's discussing debt restructuring with its lenders.

The company said it was in compliance with its financial covenants as of June 28, the end of its second fiscal quarter.

David Phelps • 612-673-7269