New Dakin Inc. Chairman Seeks a Return to Plush Profits : Toys: Robert G. Solomon, who built rival Applause into a major concern, takes over the firm whose last big success was its Garfield stick-on.

Can Bob Solomon find the next Garfield stick-on doll? Those faddish dolls, based on the cartoon cat, equipped with suction-cup limbs and plastered on thousands of motorists’ car windows, have generated more than $50 million in sales for Dakin Inc., one of the nation’s leading marketers of stuffed animals and other gifts.

But the dolls also were among the last big hurrahs for Dakin, a San Francisco-based company. Three years ago Dakin’s sales topped $200 million, but this year they will total little more than $75 million, and the company’s employment has dropped nearly 20% to about 500 people, Solomon said.

Hoping to stem the slide, the Dakin family two weeks ago sold control of the company to Robert G. Solomon for an undisclosed price and named him chairman and chief executive.

Now it’s up to Solomon to find new products that will make Dakin again stand out in the crowded stuffed-animal marketplace. He’s convinced that he can do it, because he built Applause Inc., a Woodland Hills-based concern, into a major gift and novelty company during the 1980s.

Applause’s success also has made Solomon a wealthy man at age 37, giving him the wherewithal to buy control of Dakin. (He won’t specify what size stake he bought, only that it’s more than 50%.)

“Dakin has been synonymous with stuffed animals,” Solomon said in an interview in Woodland Hills, where he’ll maintain an office while managing Dakin. “What I intend to do is make them more innovative.”

Solomon, who takes over Dakin next week, won’t say precisely how he’ll do that. But much of Applause’s growth came from selling stuffed toys based on popular cartoon and movie characters such as the Sesame Street figures and Smurf dolls--just as Dakin has done with Garfield the Cat. And Solomon said that if licensed characters continue to sell, “I’m going to try to get (new licenses) before my competition.”

Indeed Benny Neiyer, the owner of the toy store Young at Heart in Canyon Country, said he sells only Applause animals because they’re licensed characters such as Walt Disney Co.’s 101 Dalmatians and Sesame Street’s Big Bird. “Dakin is not doing too well right now because it doesn’t have any licensed hits besides Garfield,” he said.

That sentiment means that Solomon, in effect, will be competing against his own accomplishments at Applause as he tries to bolster Dakin’s performance. And his work is cut out.

Besides lacking new hit products, the 35-year-old Dakin has suffered from an industrywide slowdown in the stuffed-animal market. U.S. sales of traditional stuffed animals--those without electronic gadgetry inside-- plunged 44% at the wholesale level in 1988 alone, to 94 million units, then dropped an additional 29% through 1990, when they totaled 67 million units, according to the Toy Manufacturers of America, a New York-based trade group. By dollar volume, sales last year were $435 million, down from $596 million in 1988.

This shrinkage has occurred at the same time that more competitors--notably some of the giant greeting-card companies such as Hallmark Cards Inc.--have entered the field.

The same trends also have slowed Applause, whose 1990 sales totaled about $150 million, Solomon said.

James Klein, the current president of Applause, declined to disclose his company’s sales for this year or provide recent financial information. But he said Applause is “rolling right now” and expects its pretax earnings to double from last year.

For the past two years Dakin’s managers have also had things to worry about and have been slashing the company’s size to stem losses that totaled several million dollars a year, Solomon said. It’s worked, he said, and Dakin is now about breaking even.

Dakin does have its strengths, however. The company is virtually debt-free, the Dakin name carries strong brand recognition among consumers and Dakin’s mostly generic product line gives Solomon a clean slate on which to design Dakin’s comeback.

The lack of debt is particularly appealing to Solomon, who quit as president of Applause a year ago because of problems caused by Applause’s excessive debt load. Applause also has undergone major changes since he left.

Applause was known as Wallace Berrie & Co. until 1982, when it bought the Applause unit of Warner Communications Inc. and adopted the name. Applause later became a partnership owned by Solomon, who had joined the company as a salesman in 1975, and two other men.

Then in 1988, Avalon Marketing Inc., a Los Angeles company controlled by the wealthy Thompson family of Dallas--whose holdings then also included the 7-Eleven chain’s parent Southland Corp.--bought control of Applause for $115 million in cash and stock. The deal was a leveraged buyout, in which the Thompsons borrowed most of the money by floating high-yield, high-risk junk bonds.

Solomon declined to say what he received, but if he was an equal one-third owner of the partnership, he presumably got $38-million-plus from the sale. Solomon also remained president of Applause, which was lumped together with certain other Thompson gift-ware holdings in Avalon Marketing.

“We thought we were on our way to building a billion-dollar empire,” he recalled.

It didn’t happen. Although Solomon won’t disclose specifics, he said he immediately felt constrained by Avalon’s debt problems--although Applause itself was highly profitable--and by the Avalon/Thompson investor group.

“The problem was the debt, and a marketplace that wasn’t allowing for the sort of growth we had hoped for,” he said. “For both parties it did not work out, and there were clearly different views of where the company should be going.”

While Solomon spent the past year looking for new opportunities, changes continued at Applause and Avalon. First, the Thompsons began disappearing from the scene after Southland, which they had bought for $5 billion of mostly borrowed money in 1987, filed for bankruptcy reorganization.

Also this year, the holders of Avalon Marketing’s bonds exchanged the bonds for stock in the company, thereby erasing most of its debt, Klein said. That made the bondholders the company’s new owners, and they include Loews Corp.; Shamrock Holdings Inc., a Burbank investment firm controlled by Roy E. Disney, and two companies that have their own troubles because of junk bonds: Executive Life Insurance Co. and Columbia Savings & Loan.