Escada Reports Loss as Customers Shun Winter Fashion
Escada AG, the German clothier that
sells luxury fashions for as much as $7,000, reported a third
straight quarterly loss as customers shunned its winter
fashions.
The net loss in the fiscal first-quarter ended Jan. 31 was
3.9 million euros ($5.9 million), compared with a profit of 6.9
million euros a year earlier, the Munich-based company said
today in a statement. Sales fell 12 percent to 142.1 million
euros. Escadas stock dropped 7.7 percent.
Chief Executive Officer Jean-Marc Loubier said Dec. 20 that
Escadas winter collection wasnt selling well because colors
were too dark and tissues too heavy. Loubier, who took over as
CEO in June, hired former Valentino designer Damiano Biella in
October as the companys new chief designer.
“The reported figures are clearly below expectations,
Joerg Frey, an analyst at Bank Sal. Oppenheim in Frankfurt, said
in an interview. “But investors shouldnt underestimate the
value of the brand name. The analyst has a “buy rating on
Escada shares and a price estimate of 31 euros.
Escada declined 1.07 euros to 12.83 euros in Frankfurt
trading. Yesterdays 8.3 percent decline was the stocks
steepest percentage drop since Dec. 20 when the clothier
reported its first annual loss since 2003.
Marketing Spending
“Business performance was affected above all by the well-
documented weak response to the fall/winter collections 2007,
which had already started to impact the group negatively in the
fourth quarter, Escada said in todays statement.
The company repeated that it expects to return to profit
this year after making a loss of 26.8 million euros in the
previous fiscal year. Initial orders for the coming fall/winter
collections increased 7 percent, Escada said.
Loubier said in a separate statement that the year is one
of “transition, adding that the first quarter result was
expected.
Earnings before interest, tax, depreciation and
amortization fell 69 percent to 6.8 million euros in the quarter
from 21.6 million euros a year earlier, the clothier said.
Escada plans to increase marketing spending from last
years 31 million euros to catch up with competitors, Chief
Financial Officer Markus Schuerholz said at a press conference
in Munich. The company aims to increase its operating margin to
more than 15 percent in the mid-term from last years 9.9
percent, he added.
The Escada brand generated sales of 96.6 million euros,
down from 111.5 million euros a year earlier. Revenue from the
Primera unit, which includes the apriori, BiBA, cavita and
Laurel brands, declined 7.9 percent to 52.2 million euros.
Calfskin Handbags
Escada doesnt have any firm plans to dispose of its
Primera unit, Loubier said at the press briefing. The company
sees Primera as a “positive financial investment, but would
sell the unit if there was a “beautiful offer, according to
the CEO.
Escadas product range includes calfskin handbags covered
in fox fur and handmade cashmere coats for more than $3,000
each. The company this week replaced Hans-Joerg Rudloff, who
resigned in December, with Claus Mingers as supervisory board
chairman.
Competitor Gerry Weber International AG, Germanys third-
largest maker of womens clothing, said Feb. 27 full-year profit
increased 28 percent as brand-name sales rose.
Escada shares have fallen 31 percent this year after
declining 36 percent in 2007, reducing the companys market
value to about 220 million euros.
