By  on September 28, 2007

BERLIN — The Escada Group has revised downward its sales and earnings forecast for fiscal 2007, ending Oct. 31, citing a "difficult start in the fourth quarter" as well as onetime expenses related to compensation and shop restructuring measures and increased tax expenses brought about by German tax reforms.

During a conference call Thursday about the group's nine-month results, Escada chief financial officer Markus Schürholz described the start of the fall-winter 2007 season as "weak. Given that nearly two-thirds of the [fourth] quarter are now over, it was clear we had to revise our estimates."

The Munich fashion group is now expecting consolidated sales and group earnings before interest, taxes and depreciation for the year ending Oct. 31 to be slightly below last year's levels. In June, Escada projected moderate single-digit gains for the current fiscal year.

As announced in June, Escada has adopted a program of structural optimizations amounting to 35 million euros, or $40.1 million at current exchange rates, this fiscal year. At the same time, and also as previously announced in the second quarter, German tax reforms have saddled the group with "strikingly high tax expenses" of 14 million euros, or $18.6 million, for the fiscal year.

In the third quarter, gross profit for the group rose 4.3 percent to 106.9 million euros, or $144.8 million, while group sales were minimally down 0.6 percent at 157 million euros, or $212.7 million. All dollar figures are converted from the euro at average exchange rates for the quarterly period.

On a pretax basis, however, the group fell to a loss of 13.4 million euros, or $18.2 million for the quarter, reflecting in part 6.7 million euros, or $9.1 million, in onetime expenses booked during the period.

Escada brand sales slid 6.7 percent in the quarter to 109.6 million euros, or $148.5 million, largely impacted by the company's pushed-back delivery dates, while EBITDA for the brand rose 11.2 percent in the quarter.

The Primera Group, which includes the brands Apriori, Biba, Cavita and Laurèl, boosted third-quarter sales 9.3 percent to 52.8 million euros, or $71.5 million, and improved EBITDA by 21.1 percent to 4.6 million euros, or $6.2 million.

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