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Wolfgang Ley: Escada is on Road to Recovery

MUNICH -- Escada has weathered the worldwide recession and is making a turnaround, according to chairman Wolfgang Ley, who told a press conference here Wednesday that the firm's operating loss in fiscal 1993 came in smaller than expected.<BR><BR>He...

MUNICH — Escada has weathered the worldwide recession and is making a turnaround, according to chairman Wolfgang Ley, who told a press conference here Wednesday that the firm’s operating loss in fiscal 1993 came in smaller than expected.

He also projected a small profit for the current year and significant growth thereafter.

For the year ended Oct. 31, 1993, Escada Group showed an operating loss of $16.9 million (29 million marks) at current exchange, well below the projected loss of $21.5 million (37 million marks) forecast in December. Including the proceeds of the sale of St. John Knits last year, Escada Group showed a net profit of $8.2 million (14 million marks). In the prior year, Escada Group ended the year with an operating loss of 59 million marks and with special items there was a net loss of 119 million marks.

Escada AG, the Escada company operating in Germany, posted an operating profit of $7 million (12 million marks) in 1993, against 4 million marks a year earlier.

“Despite the recession and despite the dismal economic climate, Escada has reached the goals we set for the company and has a good foundation for future development,” said Ley.

Cost-cutting strategy and reorganization, including the shut down of unprofitable stores and divisions, have trimmed Escada’s fixed costs by $42.5 million (73 million marks). This, along with the sale of St. John Knits last year, has allowed the company to reinstate dividends, of $1.75 (3 marks) a share, which will be paid retroactively for each of the last two fiscal years.

Worldwide turnover for Escada Group in 1993 dropped to 1.16 billion marks. A year ago, turnover was 1.31 billion marks.

The sale of St. John Knits, along with troubled divisions Laurel and Crisca, accounted for much of the drop.

“Despite the lower turnover, the Escada collection has slightly increased its sales in almost all markets,” said Ley.

Laurel, which remains strong in France and Spain, has been repositioned and is now competitive to similar Italian brands, he said.

“With a turnover of [$69.9 million, or 120 million marks], we are not about to give it up. There is a huge potential there,” said Ley.

Crisca, Escada AG’s third label, has been consolidated with Nic Janik, and will only be sold in foreign markets under the Crisca name. Escada’s newest line is Escada Sport, a leisure collection which includes jeans and sportswear. It is moderately priced and designed to appeal to the younger buyer.

Overall, Ley outlined strategy to build “The House of Escada,” a concept based on recognition and marketability of the Escada name, the company’s premier label. The concept includes three divisions: clothing, accessories and fragrances-cosmetics.

“We want to make Escada a cult,” said Ley.

Accessories will be organized under a new company called Escada Development SARL, based in Paris. As noted, Beatrice Bongibault, now general director of the Valentino Group in Rome, will become Escada Development’s new director in July.

“We are not about to turn Escada into a French company,” said Ley. “But there are some things that Paris does better than Bavaria.”

Other moves cited by Ley to strengthen Escada’s international management team include the appointnment of Ron Frasch, formerly senior vice president at Neiman Marcus, as president of Escada USA.

As for Escada Beaute, Ley noted, it will be consolidated under Claude Palatin in Paris. Product development will also be shifted to Paris, but with strong emphasis on products for the U.S. market. The post of president of Beaute New York, just vacated by Larry Appel, will not be filled in the near future.

Beaute with total sales of $30.2 million (52 million marks) worldwide last year is still not showing a profit, but Ley predicted that it would be in the black by the end of 1994.