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corresp

June 29, 2005

VIA EDGAR

Securities and Exchange Commission

450 Fifth Street, N.W.

Washington, DC 20549

    Re:

    Enesco Group, Inc. (the “Company”)

Form 10-K for the year ended December 31, 2004

File No. 001-09267

Ladies and Gentlemen:

       This letter is submitted by the Company to respond to the comments of the staff of the
Securities and Exchange Commission (“SEC”). Each of the staff’s comments is set forth below (with
page references unchanged) and is followed by the Company’s response with page references to the
Form 10-K filing.

       The Company acknowledges that (1) it is responsible for the adequacy and accuracy of the
disclosure in its filings, (2) staff comments or changes to disclosure in response to staff’s
comments do not foreclose the SEC from taking any action with respect to the filing and (3) the
Company may not assert staff comments as a defense in any proceeding initiated by the SEC or any
person under the federal securities laws of the United States.

Form 10-K for the Year Ended December 31, 2004

General

    1.

    We note the information provided to us in your responses to comments
2,4,8,13,17,19,21, 22 and 25 in our letter dated May 11, 2005. Please confirm to us that
you intend to include disclosures in your future annual and interim filings, as
applicable, to reflect the type of information provided to us to the extent then
applicable.

Securities and Exchange Commission

June 29, 2005

Page 2

Response:

We intend to include disclosures in our future annual and interim filings, as applicable, to
reflect the type of information we provided in response to comments 2, 4, 8, 13, 17, 19, 21, 22 and
25 of your letter dated May 11, 2005 to the extent then applicable.

Item 7. Management’s Discussion and Analysis of Financial Position and Results of Operations, page 17

Critical Accounting Policies, page 18

    2.

    We note your response to comment 5 in our letter dated May 11, 2005. Please confirm
to us that you intend to include disclosures in your future annual and interim filings, as
applicable:

    •

    to quantify and discuss the effect of critical accounting estimates on your
results of operations for the years presented;

    •

    to discuss whether changes in your estimates of future operating results and
related cash flows are reasonably likely to occur and result in an impairment of
your long-lived assets and goodwill; and

    •

    to reflect the type of information provided to us in your response to the
extent then applicable.

Response:

We intend to include disclosures in our future annual and interim filings in response to comment 5
of your letter dated May 11, 2005, as applicable:

    •

    to quantify and discuss the effect of critical accounting estimates on our
results of operations for the years presented;

    •

    to discuss whether changes in our estimates of future operating results and
related cash flows are reasonably likely to occur and result in an impairment of
our long-lived assets and goodwill; and

    •

    to reflect the type of information provided to you in our response to the
extent then applicable.

    3.

    We note your response to comment 7 in our letter dated May 11, 2005. Reserves as to
which the additions, deductions and balances are not individually significant may be
grouped in one total and in such case the information required by columns C and D of the
schedule need not be given. See Rule 12-09 of Regulation S-X. In future filings please
revise to group and separately disclose other contra-accounts receivable reserves.

Securities and Exchange Commission

June 29, 2005

Page 3

Response:

In future filings, we will revise our schedule to group and separately disclose other
contra-accounts receivable reserves that are not individually significant in response to comment 7
of your letter dated May 11, 2005.

Liquidity and Capital Resources, page 24

    4.

    We note your response to comment 11 in our letter dated May 11, 2005. It appears
that changes in components of working capital discussed in your proposed analysis of
financial position vary significantly from amounts reflected in your statements of cash
flow. In future filings, please clarify your discussion and analysis of changes in
financial position so that a reader is able to reconcile to the related cash flow amounts.

Response:

In future filings, we will clarify our discussion and analysis of changes in financial position so
that a reader is able to reconcile to the related cash flow amounts in response to comment 11 of
your letter dated May 11, 2005.

    5.

    We note your response to comment 12 in our letter dated May 11, 2005. In future
filings, please also disclose minimum royalty commitments in your table of contractual
obligations. In addition, please confirm to us that you intend to include disclosures in
your future annual and interim filings, as applicable, to reflect the type of information
provided to us to the extent then applicable.

Response:

In future filings, we will disclose minimum royalty commitments in our table of contractual
obligations. We also intend to include disclosures in future annual and interim filings, as
applicable, to reflect the type of information provided to you in our response to comment 12 of
your letter dated May 11, 2005 to the extent then applicable.

Notes to Consolidated Financial Statements, page 34

Note 1. Summary of Significant Accounting Policies, page 34

Securities and Exchange Commission

June 29, 2005

Page 4

    6.

    Reference is made to your response to comment 19 in our letter dated May 11, 2005.
You state revenue is recognized when the club kit is shipped and that the membership fee
is paid in exchange for products delivered representing the culmination of a separate
earnings process. Tell us if the membership fee is refundable or nonrefundable. As
previously requested, please advise us of what ongoing services you provide to members
subsequent to the sale of the club kit. In this regard, in addition to the physical items
included in the kit, it appears that members are also entitled to a quarterly newsletter,
access to an exclusive club web site and toll free hotline as well as special surprises
throughout the year. Tell us why the membership fee does not include services delivered
over the membership period. Further, please explain why your method of recognizing the
entire membership fee when the kit is shipped is more reasonable than recording the fee
straight-line over the membership term. See SAB Topic 13.A.

Response:

Our club membership fees are nonrefundable, and we reserve the right to change the program without
notice. In addition to the physical items included in the club kit (i.e., figurine, tote bag/lunch
cooler/case, etc.), members receive a subscription to newsletters, access to member websites,
access to toll-free hotlines, special surprises which include opportunities to purchase seasonally
themed merchandise, and the opportunity to purchase additional merchandise.

However, upon applying for membership, members must accept the following terms: “I agree to the
above stated membership fee and understand membership benefits will be received by myself or the
gift recipient within 30 business days after processing, pending inventory availability. (This box
must be checked in order to process this application).”

This stipulation demonstrates that the products delivered in the club kit represent the culmination
of the earnings process. The newsletters are essentially marketing materials that contain
information regarding products, artists, and member stories, as well as special offers and new
product offerings. The content of the newsletters and the member website is focused on the brand to
which the club relates, but is a subset of the information found on the website available to the
general public. The toll-free hotline is a separate number that is given only to members, but is
staffed by the same individuals answering our general customer service numbers. Special surprises
relate to additional opportunities to purchase merchandise with special themes at different times
of the year (e.g., Thanksgiving, Christmas, Father’s Day, etc.). Also, our margins on the sales of
club kits are commensurate with margins on sales of other merchandise within the same brand. In
like fashion, sales of

Securities and Exchange Commission

June 29, 2005

Page 5

additional product under special offers are also sold at margins consistent with the brand. Our
receipt of the membership fee does not result in our extending to members lower prices for products
which may be purchased in the future, but instead extends the limited time opportunity to purchase
other product line items not otherwise made generally available to the market. In summary, the
actual value obtained by a customer in exchange for his or her membership fee is the contents of
the club kit itself.

With respect to SAB Topic 13.A, specifically section 3f, the types of arrangements in which a
portion of up-front fees should be deferred relate to situations in which the earnings process has
not culminated. In our situation, the pricing of the membership fee is not connected with the
other aspects of the membership, and in the absence of those other elements, we believe the
customer would still ascribe significant value (relative to the fee) to the club kit contents. In
our situation, the exchange of the club kit for the membership fee is the culmination of the
earnings process, not the origination of a revenue-generating arrangement. Therefore, we believe
our method of recognizing the entire membership fee when the kit is shipped is more reasonable than
recording the revenue over the membership term.

Form 10-Q for the Quarter Ended March 31, 2005

Item 1. Financial Statements, page 6

    7.

    We note that you continued to report an operating and cash flow loss during the
quarter ended March 31, 2005. Please tell us the results of your test of the
recoverability of long-lived assets at the end of the quarter. In doing so, tell us
whether you have revised your estimates of future operating results and cash flows used to
test the recoverability of long-lived assets and the extent to which estimated
undiscounted cash flows exceed the carrying values of your long-lived assets.

Response:

As of March 31, 2005, we concluded that we did not have an impairment of our long-lived assets.
Our non-U.S. operations have continued to generate positive cash flows and have remained
profitable. As a result, the long-lived assets at these reporting units are not impaired. With
respect to the U.S. operations, we are a distributor, and as a result, we do not have significant
long-lived assets, except for our corporate/U.S. headquarters building, and our ERP system.

Securities and Exchange Commission

June 29, 2005

Page 6

We performed an impairment analysis in December 2004 in connection with the U.S. reporting unit’s
long-lived assets The result of that analysis was that the U.S. long-lived assets were
recoverable. However, a change in the estimated useful life of the ERP system was warranted. As a
result, the ERP system will be fully depreciated before the end of the June 30, 2005 quarter.
Also, note that the fair value of our headquarters building is well in excess of its net book
value, based on an external appraisal and recent purchase offers.

The projections used for this analysis were materially unchanged through the end of the March 31,
2005 quarter. We are currently preparing revised forecasts to reflect restructuring and other cost
reduction activities we are considering. We will consider the impact of these revised forecasts on
our long-lived asset valuation in the quarter ended June 30, 2005.

Notes to Consolidated Financial Statement (Unaudited), page 11

Note 2. Summary of Significant Accounting Policies, page 12

Basis of Presentation, page 12

Inventory Reserves, page 14

    8.

    It appears that your method of establishing inventory reserves to state inventory at
the lower of cost or market may result in the recognition of gains on inventory previously
written-down to market to the extent that goods identified as excess inventory in one
period is not identified as excess inventory in a future period. Please refer to footnote
2 of Statement 3 in Chapter 4 of ARB 43. Please advise.

Response:

Our inventory reserve methodology did not result in the recognition of gains on inventory
previously written down, which is consistent with footnote 2 of Statement 3 in Chapter 4 of ARB 43.
We acknowledge that the description of our methodology in our Form 10-Q for the quarter ended
March 31, 2005 implied a potential for the recognition of gains. We will clarify the description
of our methodology in future filings to avoid the implication that gains could be recognized on
previously written down inventory.

Item 2. Management’s Discussion and Analysis of Financial Position and Results of Operations, page 21

Liquidity and Capital Resources, page 27

    9.

    We note your disclosure that you are not aware of any trends, events, demands,
commitments or uncertainties that reasonably can be expected to have a material

Securities and Exchange Commission

June 29, 2005

Page 7

adverse effect on liquidity and the ability to meet anticipated requirements for working
capital and capital expenditures. We also note that you have reported operating losses for
four of the past five quarters and cash flow losses since 2003 and that your license
agreement with Precious Moments will terminate on July 1, 2005. In future filings please
discuss the recent trend of operating and cash flow losses, the uncertainties regarding
future operating and cash flow results and the potential impact thereof on your business,
your ability to comply with debt covenants and your ability to close the additional
financing under the global senior revolving credit facility commitment or tell us why a
discussion of these matters is not necessary.

Response:

In future filings, we will discuss the recent trend of operating and cash flow losses, the
uncertainties regarding future operating and cash flow results and the potential impact thereof on
our business, our ability to comply with debt covenants and our ability to close replacement
financing under the global senior revolving credit facility commitment.

* * *

     Any questions regarding the above responses should be directed to me at (630) 875-5990 or
Koreen Ryan at (630) 875-5544.

Sincerely,

/s/ Paula E. Manley

PAULA E. MANLEY

Chief Financial Officer

    cc:

    Bill Thompson, Staff Accountant

Donna Di Silvio, Staff Accountant