By  on June 15, 1994

NEW YORK -- "We have to look at this business through the eyes of a retailer, not a wholesaler," says Ron Frasch, president of Escada USA Inc., as he outlines his plans for reinvigorating this multifaceted fashion business.

Because of his extensive retail experience, Frasch could be just the executive to do that. He took over his current job in February, coming from Neiman Marcus, where he was senior vice president and general merchandise for women's apparel. He started his retail career in 1970 and had been with Neiman's since 1984.

"The whole focus for every division is to be a service machine," said Frasch. He underscored this point with a metaphor: "I want to make sure everyone in this company wears a maid's uniform when they come to work."

Escada USA is the U.S. arm of the Munich-based Escada Group. Frasch joined the international fashion giant at the tail end of the worst two years in its 15-year history.

After a track record of explosively successful growth that mirrored the excesses of the Eighties, the brakes went on in the fiscal year ended Oct. 31, 1992, when the Escada Group reported an operating loss of 59 million marks -- or $35.9 million, at current exchange rates -- on a volume of 1.3 billion marks, or $796.1 million. Special items deepened the net loss to 119 million marks, or $72.3 million.

In fiscal 1993, the firm also posted an operating loss -- 29 million marks, or $17.6 million -- on sales of 1.16 billion marks, or $705 million. Gains from the sale of St. John Knits, however, gave the group a net profit of 14 million marks, or $8.5 million.

According to Frasch, Escada USA was unprofitable in 1993, mostly due to write-downs the firm took as part of its recovery program.

In an interview in the firm's showroom at 1412 Broadway, Frasch talked over the comprehensive plans that he and Wolfgang Ley, chairman of Escada Group, are implementing as they try to insure the firm's future.

Frasch pointed out that Escada USA is "now back in the black" and emphasized that, for the most part, the Escada Margaretha Ley Collection has always performed well. The company ran into problems with many of its secondary subsidiaries that were not properly positioned or priced."Last year, the company made some tough decisions," Frasch said. "They said, 'Let's put these problems to bed and move forward."'

This included taking write-downs on real estate, closing the foundering Crisca division with the spring 1993 collection, shutting five of the stores for the Laurel division and looking "at every lease and franchise arrangement," according to Frasch.

"They were trying to cut anything that might be a drag," Frasch said.

The firm also decided that, following the delivery of the fall collection, it will no longer distribute Cerruti 1881 in the U.S.

"From our point of view, part of what we needed to do as a company was to make priorities," said Frasch. "We are focusing on the divisions we feel we can do major business with."

Volume for Escada USA in fiscal 1994 is expected to hit about $140 million, up from $120 million in 1993. The retail business accounts for 39 percent of those sales, said Frasch. Of the remaining wholesale volume, 75 percent comprises the Escada Margaretha Ley Collection and the recently introduced Escada Sport line. The remaining 25 percent comprises Laurel, Badgley Mischka, Apriori and Nic Janik, in order of volume. Frasch went through the recovery plan brand by brand, noting that many of the changes implemented involve lowering prices, repositioning so more major accounts can carry the brands and making more of an effort to offer a variety of services to its retailers. In the cases of the Laurel and Apriori divisions, the changes being implemented in the U.S. market are being mirrored worldwide.

Frasch has a favorite expression he uses when discussing the Escada Collection: "top-of-mind." He noted that the collection is enjoying success right now: Recent fall trunk shows have racked up high-six-figure sales at most retailers and hit a record in May, when the Escada boutique connected to the Lilly Dodson store in Dallas had sales of $1.5 million at a four-day fall trunk show.

But he wants it to be a more prominent resource in the mind of retailers, whom he thinks don't really understand what the company can fully offer them.

"I don't think Escada needs to change what we do in terms of the collection," he explained. "But we have to be more aggressive about the ways in which we communicate. We should be top-of-mind for the retailers."It's not about one thing," he continued. "We have great pride and great people here, and now we have a great plan to drive the company forward. But, for instance, why don't we have more market share? If anything, the trunk shows prove to me that we can do a lot more day-in, day-out sales."

How does one make a brand "top-of-mind"? As Frasch sees it, it has to do with service. He has started hiring regional marketing specialists to service the stores by going to the branches to see how the collection is merchandised and learn what help retailers need. He wants retailers to avail themselves of the Escada staff if they need to, especially for help with in-store events and advertising problems or questions they may have. Frasch admitted that because the Escada Collection is so enormous -- approximately 1,200 pieces every season -- it can be difficult for retailers to get a handle on what exactly the company offers. It's something he's experienced first-hand, having worked closely with Escada for a decade when he was at Neiman's.

He has a plan to cut through that: Top-level store management will be invited to the showroom in August to get a small preview of the spring collection. It will be a tightly edited fashion show, presenting just enough looks for the stores to get an idea of the direction. Then, in November, Escada will launch a full-scale runway show during 7th on Sixth. The show will feature, among other things, looks from Escada Sport, which was launched for fall. It is part of Escada's line extension concept, said Frasch, referring to the expansion of the Escada name into other merchandise areas.

For instance, the firm is planning to greatly expand its accessories division under the leadership of Beatrice Bongibault, formerly with Valentino. She joins the Escada Group July 1 to head up Escada Development, under which accessories are placed.

The Escada Sport line features casual weekend clothing, from fleece sweatshirts and cashmere drawstring pants to denim jeans, flannel shirts and down jackets, but unlike many designers' more casual lines, it will hang in stores' designer areas.

In its first season, the line has exceeded sales projections by 80 percent and may fully double that projection once reorders have been accounted for, said Frasch. In terms of sales, it is "nipping at the heels of Laurel," he added. Escada recommends retailers take a 54 percent markup on the line, with the average suggested retail price at $225 for a garment that cost $104 wholesale."It's for the Escada designer customer, although we think we will be able to dress other designer customers, as well as younger women," he said. "The question we asked ourselves was this: 'Are we fully servicing these women from head to toe for all occasions?' The answer was no."

Taking that concept one step further, Frasch said he hopes to eventually break out the Escada eveningwear from the rest of the collection.

Moving onto Escada USA's other labels, Frasch discussed Laurel next. Laurel, a troubled division that was categorized above bridge and below designer in the past, was repositioned by Frasch as a bridge collection the first day the fall market for bridge opened in February, just as he joined the firm. Wholesale prices now range from around $155 to $220 for a jacket, down from a range of $220 to $325. "We've looked at every component of the line," said Frasch. "We used to have 10 deliveries per season; now we'll do what is needed for the American market, which might be five or six. The types of fabrics will stay the same, and production will still be out of Europe. We're not cutting back on any of those things to bring down the prices. We're taking tighter margins."

The former retailer sees room for growth in the bridge sector, servicing women from around 40 to 55 years old who need career and lifestyle pieces. Frasch sees Laurel as direct competition for firms such as Ellen Tracy and Anne Klein II. Spring will open early -- in July instead of August -- so sales associates will have the time to sit down and explain to retailers the new concept for Laurel.

"We want to hit that mid-range of $300-plus jackets and $200 bottoms, and we want to offer a buildable wardrobe concept," Frasch explained. "There will be color and print and texture -- the look that Escada is about."

Apriori, the current Escada bridge line, will remain a bridge collection, but has been repositioned to hit the more casual lifestyle sector of that market, at an opening price point. Here too, deliveries have been decreased, but will be more focused and will feature more key items and what Frasch refers to as "margin builders.""We want to insure it makes big margins for our accounts," he said, citing wholesale prices at a high of around $100 for jackets, for a suggested retail of $225.

Also, sourcing for this collection will be expanded through Premiere Asia Corp., Escada's new sourcing firm. While sourcing was primarily in Germany and Italy, it will now include Asia, Eastern Europe and Central and North America.

The dollar growth plan for Laurel and Apriori is not timid: Frasch said that through increased business with its current small specialty store accounts and expanded business with major retailers that put a lot of money into bridge, both businesses should quadruple in the next 24 months. A third subsidiary is the signature collection of Nic Janik. Frasch has also repositioned this line, lowering prices and promoting it as a "contemporary bridge designer" collection. Contrary to the impression that name implies, Frasch is not trying to cover all market categories with Nic Janik. He commented that there is room at the top end of bridge for a collection that has a bit more style and flair than many of the career-oriented bridge lines, but is not as advanced -- or "unsalable" -- as a young designer collection.

Frasch said that Janik's collection, which features classic sportswear with a twist, is not for a store that does not have a fashion customer. As a result, he anticipates that the bulk of Janik's business will remain in specialty stores.

To give the newly positioned collection a boost, Escada will launch a new ad campaign for fall. Photographed by Walter Chin, it features the Dusseldorf-based designer with model Beri Smithers. Janik also will come to the U.S. to make in-store appearances.

The Badgley Mischka signature division is a division of Escada USA. For fall, designers Mark Badgley and James Mischka opened Badgley Mischka Dress, a line of bridge-priced, special occasion dresses. While the Badgley Mischka signature eveningwear line wholesales between $500 and $600, these dresses will wholesale for $150 to $250 and will be produced domestically and in Hong Kong. The signature collection is produced here.

"They're among the true talents in the business," said Frasch of the designers.He said part of the plan to expand the Badgley Mischka signature business involves creating more looks that will appeal to a wider range of women.

"We have been accused of being too narrowly focused on the hip, downtown woman," said Frasch. "So what we're going to do is make sure we have merchandise to serve the 40-to-50-year-old woman as well as the younger women."

Moving on to retail, Frasch noted that the company's focus now is the profitable operation of its 12 Escada stores and three Laurel stores. Frasch pointed out that a major part of the firm's growth in the past six or so years has been in retail expansion. While the top volume store is the 57th Street flagship in New York, with sales of about $9 million annually, Frasch said the store with the fastest sales growth is the Las Vegas operation, which opened about 18 months ago.

"We've done a lot, and now we need to make sure we know how to run them profitably," he said of the retail division. "And it's important to continue developing our wholesale partnerships without a competitive conflict. We won't hire away salespeople from our accounts, as we've done in the past, and we don't want to infringe on a good, solid specialty store business."

The company will consider expanding the size of existing stores, especially to accommodate the new Sport collection, which is going to be housed on the main floor of Escada stores. The first stores that are being repositioned to accommodate Sport are in New York and San Francisco, where the collection will take up about one-third of the first floor in each unit.

In addition to the 12 company-owned Escada stores, there are four franchisees. Helen Gell, owner of the three Helen's Of Course specialty stores in Portland, Ore., and Seattle and Bellevue, Wash., was the first Escada franchisee and owns three boutiques. Bill Dodson, owner of Lilly Dodson in Dallas, opened an Escada boutique in 1992. Jacques and Rhannon Sellam own the Plaza Escada store in Palm Desert. Niobe Lopez-Ostala, who owns three boutiques named Frattina's in Mexico City, has one Escada boutique in Mexico City and just opened another in the Ritz Hotel in Cancun."As time goes on, we'll look at the best way to do business with our own retail stores, including whether to open more franchise operations," said Frasch, stressing that the firm's main focus is on its existing locations.

There are also 10 First Choice outlet stores, said Frasch, that are purely the result of "things we've not sold." "Those are different from our other stores, in that if we're completely successful, we won't need as many," he commented. "But we have very strict rules about those stores. We don't put merchandise in until fully one year after the season, so fall '93 will arrive in those stores when fall '94 arrives at our regular accounts."

Frasch knows that the company's business plan is a tall order, one requiring a concentrated effort on the part of everyone at Escada. But he's certain it can be accomplished. "The challenge now is that we've got to make sure we have the structure that can allow us to grow and to service our accounts," he said. "It goes back to the idea of putting on a maid's uniform as soon as we walk into the office. We've got to make sure everyone is getting the right treatment at wholesale and at retail. Everyone at this company should be accessible."

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