MUNICH — Difficult market conditions and a sales decline didn’t prevent the Escada Group from reversing a year-ago loss and posting net income of $4 million.
The firm said it met all its projected fiscal targets during the fiscal year that ended Oct. 31.
Net income came against a loss of $24.7 million in the prior year. Earnings before interest and taxes hit $26.2 million versus a year-ago deficit of $17.5 million. Dollar figures are converted from the euro at current exchange rates.
Group sales were down 8.6 percent to $789.2 million, but declined a more modest 4.1 percent for continuing operations. The Escada Beauté Group was deconsolidated as of March 31 and The Kemper Group as of Sept. 30.
The decline in revenues was "a consequence of the ongoing difficult environment in the international luxury goods market," the company said in an official press release.
EBIT for the core Escada business (Escada Collection, Escada Sport and Escada accessories and licenses) leapt 305 percent, to $23.2 million from $5.7 million the previous year. Sales for these core businesses dropped 1.6 percent to $490.1 million. Escada noted that while Escada Sport and Escada Accessories "continued to achieve gratifying growth, the Escada Collection felt the impact of consumers’ general reluctance to spend."
In its noncore business segments — Laurèl, the Primera Group, The Kemper Group and the Escada Beauté Group — EBIT rose to $3.1 million, compared with a loss of $23.1 million in the year ended in 2001. Sales were down 18.2 percent to $299.2 million, reflecting the deconsolidation of Kemper and Escada Beauté, the company said.
Escada said the improved earnings picture was primarily due to a "drastic decrease in costs and a reduction of current assets." The cost-cutting and efficiency-enhancing program set up at the end of 2001 led to savings of $52.4 million, above the anticipated savings of $35.7 million.
Chief financial officer Georg Kellinghusen said: "In fiscal year 2001-2002, Escada became leaner, more efficient and more effective. In 2002-2003, we’ll continue consolidating our business by cutting costs, reducing capital tie-up and reducing financial debt. By the end of calendar year 2003, we expect to finish refocusing on our core business as planned."Although it foresees no substantial improvement in the luxury market in the new fiscal year, Escada’s management expects "core business sales to remain stable or grow slightly," but as the exact timing of further divestments in the group is unclear, it noted that it was difficult to project for the group as a whole. Nevertheless, EBIT for the group is expected to grow to between $30 million and $40 million, and on the basis of current tax rates, group earnings after taxes are slated to reach $10 million to $15 million.
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