By  on March 17, 2009

BERLIN — Tough times persist at Escada — and its management admits there’s no end in sight this year.

On Tuesday, the struggling German fashion house reported final figures for the fiscal year ended Oct. 31 and results for the first quarter ended Jan. 31.


 In line with preliminary figures released in December, fiscal 2008 net losses totaled 70.3 million euros, or $105.2 million at average exchange, compared with a loss of 27 million euros, or $40.4 million, the previous year. Special items, restructuring charges and unscheduled depreciation losses on goodwill, other assets and deferred taxes totaling 42.8 million euros, or $64 million, hit earnings, the company noted.

Adjusted earnings before interest, taxes, depreciation and amortization dropped 71.1 percent to 19.5 million euros, or $29.2 million at average exchange. Group sales for the year were down 15.2 percent to 582.1 million euros, or $871.2 million.

The downward trend continued in the first quarter, with net losses of 6.3 million euros, or $8.3 million, compared with a loss of 4 million euros, or $5.3 million, in the corresponding period a year earlier.

EBITDA in the quarter dropped 19.1 percent to 5.5 million euros, or $7.3 million, though the Escada brand segment significantly improved EBITDA to 9.8 million euros, or $13 million, compared with 5.6 million euros, or $7.4 million, a year earlier. The Premira unit, which is officially up for sale and includes the Apriori, Cavita and Laurèl brands, plus the Biba retail chain, posted a loss of 4.3 million euros, or $5.7 million, for the three-month period.

Group sales slid 7.5 percent to 131.5 million euros, or $174 million, in the quarter, with Escada brand sales down 14 percent to 82.8 million euros, or $109.5 million.

Against a backdrop of ongoing restructuring costs and a weakened luxury market, Escada’s management sees little relief in the year ahead. For fiscal 2009, Escada is projecting a decline in group sales of “between a high single-digit and lower double-digit percentage range.”

The company is in the “midst of a full-scale reorientation,” chief executive officer Bruno Sälzer said. “Given the systemic lead times of over a year in the fashion industry, the effects will not become visible in the short term.” Nevertheless, he said he expects the downturn to soften somewhat.

However, the company is facing a credit crunch. To generate needed funds, Escada said Tuesday that it will propose a reduction in the company’s capital stock by 48.9 million euros, or $63.5 million, at the annual shareholders’ meeting April 28. The amount equals the balance sheet loss for fiscal 2008.

The calculated portion of each share in the capital stock would decline from 5.12 euros, or $6.65 at current exchange, to 2.78 euros, or $3.61, in a move that would “facilitate the issue of new shares.” As Escada pointed out, new shares issued under a capital increase cannot fall below this level.

Escada also said it was in “intensive negotiations” with capital and credit lenders to secure midterm financing.

According to a source, Escada’s largest shareholders, the Herz brothers, who together hold about a 25 percent stake, intend to participate in the new capital increase. However, the source also said they wish to keep their interest in the company below 30 percent and want other shareholders, including Russian investor and former major shareholder Rustam Aksenenko, to acquire new shares in the company.

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