By  on December 22, 2005

BERLIN — Escada Group beat its financial goals for fiscal 2004-2005 by delivering robust profits on a moderate sales gain.

The German fashion house released preliminary figures on Wednesday, that showed aftertax profits more than tripling to 14 million euros, or $17.6 million, in the year ended Oct. 31 from 4.5 million euros, or $5.5 million, in the previous year. Group sales for the year gained 3.7 percent to 648.6 million euros, or $815.8 million. When adjusted for currency effects, sales showed an increase of 4.3 percent.

Dollar figures are at the average exchange rate.

"We have begun a phase of profitable growth," said Escada chief executive officer Wolfgang Ley during a conference call. He said in spite of a weaker dollar, sales in the U.S., which currently generate more than 20 percent of group sales, were up 10 percent in dollars. But when converted into euros, U.S. sales were slightly below last year.

Ley said Germany and neighboring markets, including France, remain "difficult," but characterized growth in Eastern Europe as "dynamic," and its business in Asia developing positively.

Regarding Escada brand sales for the year, Escada Collection and Escada Sport grew 5.8 percent to 436.5 million euros, or $549 million, while pretax earnings climbed 31 percent to 46.6 million euros, or $58.6 million.

The Group's Primera division, which includes Apriori, BIBA, Cavita and Laurèl, recorded a 2.8 percent sales gain to 211.5 million euros, or $266 million, as pretax earnings jumped 37.6 percent to 18.3 million euros, or $23 million.

The Group said the Escada licenses business, particularly Escada fragrances, also achieved good results. License revenue was up about 34 percent for the year.

One weak area was the Escada accessories business, which is currently being reorganized. The name of the business unit's new Italian director will be disclosed in January. Ley said the current focus is on improving the quality, delivery and design of Escada shoes, bags and small leather goods, with structural investments being made for the spring and summer 2007 season. He said an upturn in Escada's accessories sales is not to be expected before fiscal 2006-2007.For the year ahead, Ley said he's "convinced that the current fiscal year 2005-2006 will be a successful one for Escada," one "based on sustained, profitable growth." Due to a higher level of incoming orders, Escada is forecasting a "good, single-digit gain" in group sales, Ley said, and an "overproportional increase" in the group's earnings.

Ley said he expects Escada sales in the U.S. to increase between 8 and 10 percent in euros for fiscal 2005-2006. While wholesale prices in the U.S. rose about 10 percent due to the weak dollar this past year, Ley said Escada would hold prices at current levels for the fall-winter 2006 season.

Finalized sales and earnings figures will be released at the annual financial press conference at the beginning of March. The company, which last paid out a dividend in fiscal 2001-2002, plans to again pay a dividend for fiscal 2004-2005.

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