MUNICH — With profitability back in sight and armed with a new retail concept, Escada is set to turn the corner — and ahead of plan.
It’s almost one year to the day that the insolvent German fashion house was acquired by Megha Mittal, the 33-year-old daughter-in-law of billionaire steel magnate Lakshmi Mittal, who Escada chief executive officer Bruno Sälzer describes as the “ideal investor and chairman. She’s in it for the long term and has the necessary understanding of fashion and Escada’s position in fashion.”
It’s also nearing two-and-a-half years since the ex-Hugo Boss chief took over the helm of the ailing brand, a period marked by broad-based management changes, a 20 million euro, or $25.8 million, restructuring of the supply and production chain, a bond refinancing, shrinking sales, dwindling earnings and finally, insolvency.
Insolvency, however, didn’t interrupt his original plan, which from day one was to coordinate and streamline business practices while “bringing Escada back to the fashion world with a more modern approach,” said Sälzer. He often talks of “cool glamour,” but also craziness, noting “Escada is a sort of crazy fashion statement which you can’t hide. But we’ve become much more daywear oriented and easier to wear. We want a customer who wants us four times a week, not just three times a year for special occasions.”
Compared with two years ago, the collections are more focused and 30 percent smaller, and entry price points have come down 20 percent. Sales this year are currently on 2009 levels but in terms of units, double-digit gains have been made. Most significantly, a planned decline in earnings before interest, taxes, depreciation and amortization (EBITDA) hasn’t materialized. “Year-to-date [January to September] EBITDA is positive, so my full year EBITDA forecast is now positive, with flat or slightly increased sales,” he said.
In 2009, sales reached 280 million euros, or $389.8 million at average exchange, with the Escada main line generating 70 percent of turnover.
Sälzer said sell through has improved in all main markets. “We’re up with Neiman Marcus and Saks” — Escada’s two largest customers worldwide — and Asia in total, including Japan, was up 7 percent through September.
The plan for 2011 calls for growth in both Escada and Escada Sport, as well as in China, Japan and the U.S. “But what’s been missing so far, and is now being introduced, is a new store concept for both Escada main line and Escada Sport. I really believe this is the missing link,” said Salzer.
Escada is earmarking 20 million euros, or about $25.8 million, for this retail push, which will see 12 new directly operated Escada main line stores and seven Escada Sport stores opened by the end of 2010. Fifty additional company-owned doors are slated for 2011, of which 30 are shop-in-shops, and 10 new franchise stores are planned as well as the renovation of 10 existing franchise stores. Escada currently has 182 directly operating stores in 20 countries, and sells in 1,146 doors worldwide.
The new flagship on Maximilianstrasse here is one of the largest new doors. Like all the new main line stores, the three floor, 4,850-square-foot store features a signature “focus wall” in gold-glossed oak, as well as highlighted walls in solid gold, stainless steel or the gold Escada logo pattern, all interspersed among the otherwise white veneer walls. Other key materials include black stainless steel, smoky gray glass, brass, black and beige leather, gray-and-anthracite tile flooring and carpeting, with lighting and flexible black stainless steel display elements creating a clear focus on the product.
The Escada Sport store next door will be renovated in the new complementary “silver” Sport concept, which features silver gloss beech wood and silver logo walls and more casual oak fixtures.
So far this year, Escada gold stores have also bowed in Singapore, Rotterdam, Maastricht, Seoul and Milan, with Vancouver, Shanghai, Rostov, Ljubljana, and Shenzhen and Chongqing in China. New Escada Sport silver stores are already in operation in Tokyo, Nagoya, Rouen and Mestre, with Tours and Parly in France, and Palma de Mallorca to come.
There have been rumblings the brand could get into men’s wear. The German business weekly Wirtschaftswoche recently indicated an Escada men’s wear collection would be on the market by 2014, when Sälzer’s current contract expires. However, he moved to soften expectations, saying it’s not “a topic for the next two years, but could be thereafter.”