Carat is also expected to pick up additional planning and buying work for the retailer as it invests more in brand advertising. The account's budget could rise to £8 million in total.
The agency won the business after a pitch process involving PHD and Zed Media. Sources suggest Carat had earlier been knocked out of the process only to be reinstated after discussions with Littlewoods' marketing and procurement departments.
Carat will handle planning and buying across Littlewoods catalogues, which include Choice, Kays and Littlewoods. It previously used several agencies including Zed, Universal McCann Manchester and MediaCom North.
Littlewoods is also holding a creative review through the AAR. Agencies will be briefed to position the catalogues as a modern, aspirational way to shop. The retailer, which is owned by the Barclay brothers, focused on catalogues after pulling out of the high street last year.