BERLIN — The Escada Group returned to profitability in the first half of the fiscal year after ending 2001 with a loss.

This story first appeared in the June 5, 2002 issue of WWD. Subscribe Today.

During the six months ended April 30, the Aschheim, Germany-based company posted net income of $5.9 million, more than a twelve-fold increase over the $470,000 earned in the first half of last year. Earnings before interest and taxes surged ahead nearly 90 percent to $17.2 million from $9.1 million in the year-ago period.

Group sales rose 1.1 percent to $386.4 million from $382.3 million during the half. Sales of continuing operations, eliminating the effects of the consolidation of the Biba retail chain and the deconsolidation of Escada Beaute, which became part of Wella Group in April, were flat, noted Georg Kellinghusen, Escada’s chief financial officer, on a conference call Tuesday.

Dollar figures have been converted from the euro at current exchange. Earnings weren’t available on a per-share basis.

Kellinghusen attributed the stronger profit picture in large part to the company’s cost-cutting efforts, which shaved $18.8 million from first-half expenses, primarily in the areas of personnel, administration and supply chain. Investments were scaled back to $9.4 million from $16 million in the comparable 2001 period.

“We are very satisfied with our performance in the first half, especially given the difficult consumer climate worldwide,” Kellinghusen said. “We have become more profitable, faster and slimmer.”

Last year, Escada suffered a net loss of $23.2 million.

Sales of the Escada core collection suffered a 4.5 percent sales setback, receding to $160 million from $167.6 million in last year’s first half. Sales for Escada Sport, however, rose 17 percent and for Escada Accessories and Licenses 22 percent.

Geographically, sales in Europe were slightly under last year’s figures for the period, with Germany performing worst of all, Kellinghusen said. North American sales were also slightly below last year’s levels, though Escada’s own stores generated a plus, and sales in Asia were up for the period, he said.

Escada is holding to projections first released in March calling for a slight decrease in full-year sales and a double-digit increase in earnings before interest and taxes, “which would lead to a positive results in earnings after taxes,” Kellinghusen said.

“This is a conservative prognosis, but we see no short-term improvement in the consumer climate,” Kellinghusen commented. Escada cut back sales to its own and franchised shops at the end of 2001 to reduce the risk of markdowns. Escada also expects to have reduced costs by a total of about $33 million by the end of the year.

Casualties of the cutbacks are the formerly lavish June and December runway presentations of the Escada collection, which typically would draw over 2000 Escada retailers, employees and local press. Cost considerations did play a role in the decision, Kellinghusen acknowledged, but Escada chief executive Wolfgang Ley said lack of time was the main reason the company is discontinuing the shows.

“We are more and more under pressure to start and sell earlier, and we need more time to have workshops with merchandisers and our clients,” Ley said. “The show interrupts the sequence of professional work for 10 to 12 days, and our customers want to see and work with the collection piece by piece.” To that end, the collection will be presented in small working shows in the Escada showrooms, and Ley said Escada also plans to do small, high-profile press shows later in the season in cities like Paris, New York and Moscow.”

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