By  on April 18, 2008

MUNICH — Amid falling earnings and sales, Escada chief executive officer Jean-Marc Loubier came under fire from shareholders at the German fashion house’s annual meeting here Thursday.

However, Loubier, who took over in June from Frank Rheinboldt, received support from Escada supervisory board chairman Claus Mingers, who said the ceo was “excellently suited for his position.”

Shareholders objected to Loubier’s base salary of 375,000 euros, or $596,000 at current exchange, for his first five months in office, not counting bonuses and extras of 310,000 euros, or $493,400, for a total of 685,000 euros, or $1.1 million, for the period. They also criticized a “change of control clause” in his contract allowing Loubier to leave Escada with a golden parachute of more than 2 million euros, or $3.2 million, should a new shareholder take more than a 30 percent stake of the company.

“When I read Loubier’s fixed salary in the annual report, I thought this is reasonable in the circumstances — he’s taking less than the other board members,” a shareholder said. “But when I realized this was for five months, and then noticed the bonuses, I was shocked.”

Even his lack of a Munich residence was an issue. “Not living in Munich is not normal for the head of a company in a restructuring phase,” another shareholder said, noting that investors were paying for his apartment in a top Munich hotel and frequent flights back to Paris. “This is an extreme catastrophe for a company not making money.”

For the year ended Oct. 31, group sales fell 1.2 percent to 686.8 million euros, or $923.1 million, with Escada brand sales down 5.6 percent to 461.8 million euros, or $620.7 million. Adjusted for currency effects, group sales were up 1 percent, and Escada brand sales were down 2.4 percent. All dollar figures are converted from the euro at the average rate for the period.

For the quarter ended Jan. 31, earnings before interest, taxes, depreciation and amortization fell 68.5 percent to 6.8 million euros, or $10 million, on a sales decline of 11.8 percent to 142.1 million euros, or $208.1 million.Escada this month revised its earnings and sales forecasts for the year. The group is expecting a sales decrease in the upper-single-digit percentage, and a 25 percent drop in group EBITDA. The value of Escada’s shares has fallen 75 percent in the last year.

Loubier and chief financial officer Markus Schürholz said the company is restructuring, and Schürholz said he didn’t expect the changes to have a positive impact before 2010.

Schürholz reiterated that global equity firm Apax Partners’ interest in taking a stake in Escada is a thing of the past. The talks broke off at Apax’s request.

“The data room is closed,” he said, responding to queries regarding other interested parties. “We have not spoken to any other companies.”

Majority shareholder Rustam Aksenenko, who was responsible for putting Loubier in the leadership position and is known for his impatience, was silent when asked his views regarding Loubier’s and the company’s performance.

Instead, Mingers responded, noting that Aksenenko is a member of the supervisory board and supports the restructuring program initiated by Loubier.

The supervisory board advised against the payment of a dividend, for the fifth year running. The fall of stock price has come under the scrutiny of the German regulatory agency BaFin. However, Escada spokesman Frank Elsner said, “It is BaFin’s job to look into share prices, which they are doing. But there is no investigation.”

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