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Escada Sales, Earnings Slide

"Need for action" at troubled German fashion house as it lowers 2008 forecast for the third time.

Anthony Lucia’s break from fashion didn’t last very long.

On Tuesday, the executive was named chief executive officer of Escada USA Inc., one month after he resigned as president and ceo of Hugo Boss USA for personal reasons. Lucia succeeded Lawrence DeParis, who left Escada late last month.

Lucia, who will report to Bruno Sälzer, chairman and ceo of Escada AG since July 1, had spent a decade at Hugo Boss. For six years, he was president and ceo of Boss USA, and in that time, is said to have tripled its volume, which is estimated to be $345 million. Before joining Boss as senior vice president of sales in 1998, Lucia was vice president of sales for the men’s Le Collezioni line of Giorgio Armani, and, before that, vice president of men’s Collection sales at Donna Karan International.

At Escada, Lucia’s region of focus includes the U.S., Canada and Latin America.

Escada also said chief financial officer Christian Marques, who was planning to leave the company effective Oct. 31, will remain at the firm.

William Scott, who recently joined Escada USA as chief operating officer, will report to Lucia.

On Tuesday, Escada Group lowered its full-year forecast for the third time this year, with sales and earnings continuing to slide in the third quarter ended July 31.

The German fashion house is forecasting consolidated earnings before interest, taxes, depreciation and amortization, or EBITDA, for the year ending Oct. 31 to fall between 23 million and 26 million euros, or $33.5 million and $37.9 million, compared with its previous target of 37 million euros, or $53.9 million. Net losses after taxes are expected to be at least at last year’s level of 27.3 million euros, or $39.8 million, with sales continuing to decline along the lines of the group’s nine months’ performance.

Citing a general weakening of economic conditions and the current reorientation of the company, the Escada Group reported a pretax loss of 13 million euros, or $20.3 million, for the third quarter, compared with a loss of 600,000 euros, or $800,000, for the period a year previously. Group EBITDA reached 1.9 million euros, or $3 million, compared with 15.5 million euros, or $21 million, in fiscal 2007. All dollar figures are converted from the euro at average exchange rates for the period.

Group sales in the third quarter dropped 14.3 percent to 134.6 million euros, or $210.5 million. Escada brand sales fell 16.4 percent to 91.6 million euros, or $143.2 million, while the Primera division, which includes the Apriori, Cavita and Laurèl brands, and the Biba retail chain, saw sales drop 9.3 percent. For the first nine months, group sales were down 14.1 percent.

“The nine-months figures clearly show the need for action at Escada,” Sälzer said. “At present, the reorientation is focusing on the fashion statement, the handling of the markets and the full operative business process. Given the lead times in the fashion industry, it will not be until the fall-winter season 2009 that a first positive trend will be attainable. These are the collections we are currently working on, and they will be reflected in the operative figures of the second half of fiscal year 2008-2009.”

Although Escada’s stock has been in free fall, losing more than 50 percent in value over the last year and 13 percent in the last month, Michael Kuhn, an analyst of the Deutsche Bank, nonetheless upgraded the company’s rating from “sell” to “hold” last week. The bank’s targeted share price remains at 12 euros, or $17.70. Escada shares are currently trading at 10 euros, or $14.70.

The third quarter also saw two cash capital increases involving Escada’s new minority shareholders, the Wolfgang and Michael Herz business families. Escada’s shareholder structure has altered. Each of the Herz brothers now holds approximately 12.5 percent for a total of 24.9 percent, compared with the 20.9 percent stake of Rustam Aksenenko, Escada’s former largest minority holder.