ASCHHEIM, Germany — In further moves to reduce group costs by nearly $70 million, the Escada Group announced plans to cut back its global workforce and retail network.
The German fashion house said it will thin its ranks by 20 percent, or 850 employees, including 300 in Germany. At the same time, there are plans to close about 20 of the 183 Escada shops worldwide as well as 15 Primera and Laurèl stores.
The third element of the restructuring plan will concentrate on reducing the company’s debts and improving liquidity. This will be achieved through the previously announced planned investment of $51.8 million by the private equity group HMD Partners, as well as measures taken to reduce working capital. (Dollar figures are converted from euros at current exchange.)
The planned restructuring program will result in a one-time cost of between $28.8 million and $34.5 million, Escada said.
Escada also announced its third-quarter results for fiscal 2003 ended July 31. The group booked a loss of $24.9 million, or 16.6 million euros, compared with earnings before interest and taxes of $1.8 million, or 1.2 million euros for the year-ago period. However, this year’s sum includes a one-time effect of $12.8 million, the company pointed out.
Sales for the period fell 15.4 percent to $160.5 million (139.6 million euros), but when adjusted for the deconsolidation of Escada Beauté and Kemper and currency effects, sales for the quarter were down 2.2 percent, the company said. Core Escada brand sales dipped 10 percent, but adjusted for currency effects, slid 1.1 percent, a “considerable improvement” compared with a second- quarter downturn of 5 percent and a 9.5 percent decline for the first quarter.
“The first nine months were extremely difficult for luxury goods firms due a variety of external factors, above all, reduced traveling and weak consumer demand in the light of the Iraq conflict and SARS,” said Escada chief executive officer Wolfgang Ley. “Therefore, it’s even more gratifying that after two years of continued sales declines, sales for September achieved double-digit gains compared with last year.”
The firm said it expects operating profits to improve considerably in the fourth quarter, thereby resulting in an EBITDA in the double-digit-million euros for the full fiscal year.