Escada in Trouble
Some luxury brands are thriving in these tough economic times but it looks like women's clothing and accessories brand Escada isn't one of them. The company recently cut their forecasts for the year after a sharp decline in third-quarter profits. This was the third cut in the forecast this year for the German company, it has now lowered its estimate for earnings before tax interest depreciation and amortization for the year to 23 million euros ($33.9 million), to 26 million euros ($38.3 million) for the year ending in October. This is a sharp drop from the previous estimate of 37 million euros (around $54.5 million). Shares of the company fell on the news.
Why is Escada faltering while other brands are still thriving? Part of the problem seems to that their main markets are countries like the U.S. and Spain while other brands in the same luxury sector have made a more aggressive advance into developing markets like Russia, the Middle East and Asia. Bloomberg reports that revenue at the main Escada clothing division fell 16 percent to 91.6 million euros while sales declined 10 percent to 47.9 million euros at the Primera unit, which sells cheaper women's fashions under the BiBA, Laurel, cavita and apriori brands. It is beleived that Escada will sell off Primera. Escada has made the smart move of hiring iconic supermodel Christy Turlington as their face and perhaps by selling Primera the comany can focus on keeping Escada afloat.