By Melissa Drier

BERLIN — The Escada Group is doubling its stake in Louis Féraud GmbH to 90 percent, effective Sept. 30.

The German fashion house said Monday it will take over the Dutch Secon Group’s 45 percent interest in Féraud. The other 10 percent will remain with Michael Rover, the managing director of the Escada subsidiary Kemper and of Louis Féraud GmbH, the joint venture that Escada and Secon set up in July 2001 to run the Louis Féraud ready-to-wear, couture and licensed businesses. This closes the Féraud chapter for Secon, which first acquired part of the Féraud apparel business in 1997 when it bought the German dress company Fink.

As part of its divestiture program, Escada said it is transferring its 90.1 percent stake in the Krefeld, Germany-basedKemper Group, to Féraud GmbH. As a result, Escada pointed out that Kemper will be deconsolidated from the Escada Group. Furthermore, a merger of Kemper into Féraud is planned. Kemper is already largely responsible for the production and distribution of the Féraud collections.

In discussing the new majority holding in a conference call, Escada chief financial officer Georg Kellinghusen emphasized that Escada still plans to divest itself of Féraud in the short- to mid-term, noting that the company’s majority position will make it easier to do so. No new synergies with Escada are expected or desired, he said. "The synergies are with Kemper, not Escada." Within the Group, the Féraud stake is considered a "short-term security investment," which means it is not consolidated into Escada Group accounts.

Kellinghusen would not comment on the cost of the deal, but noted that "no money flowed."

Secon chief executive Peter Heijt explained, "There were a lot of financial pluses and minuses that had to be equalized, so in the end, it was a deal without money changing hands."

As to why Secon decided to part with Féraud, Heijt remarked, "It was a step we always considered, for in our philosophy, a 45 percent stake is not having a stake. We can now concentrate on our 11 brands in the Netherlands, and I think that with Escada, the brand has a good chance to succeed. We were very close to getting it right, but with the worsening economic climate in the U.S., there was not enough fat on the bones."The announcement of Escada’s majority stake in Féraud coincided with Escada’s release of its nine-month results. For the first three quarters of fiscal 2002 (ended Aug. 31), group earnings before interest and taxes rose 72 percent to $19.1 million, in part due to reduction of inventories and the sale of Escada Beauté. However, EBIT in the third quarter fell 42 percent to $1.2 million compared with $1.7 million a year earlier.

Sales in the nine months declined 5.6 percent to $559.3 million, and in the third quarter, sales fell to $157.6 million from $195.3 million. All dollar figures are converted from euros at current exchange rates.

Kellinghusen said the dip had been anticipated, given worsening economic conditions worldwide. But he added that consumers are not only holding back on purchases, they’re practically "abstaining," particularly in Germany. Escada had planned accordingly, with very conservative sell-ins to its own shops and those of franchises — but this resulted in lower sales and earnings in the third quarter, he said.

Nevertheless, Kellinghusen said Escada’s board sees no reason to change its fiscal forecast, which it made in March. This calls for Group EBIT in a clear double-digit-million figure, with sales, adjusted for divestitures, to come in slightly below last year’s levels. Earnings after taxes are expected to "be positive.

"The economic climate will not improve," he said, "but improvements in earnings are possible. We planned on a very conservative basis."

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