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Escada Cuts Profit Forecast

Escada officially issued a profit warning for fiscal 2008 late Friday, the fashion firm's second one this year.

BERLIN — Escada officially issued a profit warning for fiscal 2008 late Friday, the fashion firm’s second one this year.

Escada’s warning confirms a WWD report last week that such a statement was imminent.

Citing poor performance of its more midmarket Primera division, in particular the Biba retail chain, Escada lowered earnings and sales targets for the fiscal year ending Oct. 31. The troubled German fashion house is projecting earnings before interest, taxes, depreciation and amortization to reach about 37 million euros, or $57.3 million at current exchange, compared with its April EBITDA forecast of 51 million euros, or $78.7 million. Escada originally had expected single-digit growth in both EBITDA and sales.

According to Friday’s announcement, consolidated sales are expected to decline by a low double-digit percentage and the group is expected to register an aftertax loss.

Escada made the announcement after the market closed. The firm’s shares had another topsy-turvy day, first gaining 12 percent on mounting speculation that Tchibo co-owner Michael Herz was taking a stake in the fashion company. However, by the end of the day, the shares closed down 6.8 percent at 14.44 euros, or $22.28.

Widespread reports say Herz has taken a 12 percent stake in Escada, though neither Herz, nor Escada’s largest shareholder, Rustam Aksenenko (who has about a 27 percent stake), nor Escada confirmed the move.

The original report, in Friday’s edition of the German financial daily Handelsblatt, said Herz had secured the 12 percent via various companies, and added that the stake was dependent on a 10 percent capital increase. The 30 million euros, or $46.2 million, raised is to be devoted to restructuring, the report said.

There has been continued speculation over the last few months that Escada would make management changes, with Hugo Boss former chief executive officer Bruno Sälzer replacing Escada ceo Jean Marc Loubier.