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Published
Sep 23, 2008
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Escada lowers 2007/08 outlook again after weak Q3

By
Reuters
Published
Sep 23, 2008

FRANKFURT, Sept 23 (Reuters) - German fashion house Escada lowered its full-year outlook for the third time this year and reported on Tuesday, September 23th a steep drop in third-quarter core profit, citing difficult market conditions.


Escada Sport 2008

Given the persistent worsening of the market environment, consolidated earnings before interest, tax, depreciation and amortisation (EBITDA) for 2007/2008 are expected to be around 23 million to 26 million euros, Escada said in a statement.

It had previously aimed at core earnings of around 37 million euros ($54.23 million) for the year to end-October. The market had been expecting full-year EBITDA of 38 million euros, according to Reuters Estimates.

Escada shares fell 8.4 percent to 9.98 euros at 0711 GMT, underperforming a 0.8 percent drop in Germany's small-cap index as the dark clouds over German retailers intensified.

"Clearly disappointing figures," Ingbert Faust, analyst at Equinet, said in a note to clients. "However, we expected the new management to clean up inventories and the balance sheet."

Chief Executive Bruno Saelzer, the former head of Hugo Boss who took over in July, said he planned further restructuring measures without being more specific.

Investors are eyeing luxury goods makers for signs that a slowdown in consumer spending stemming from the credit crisis also has spread to the wealthy.

Escada, whose dresses can cost 800 euros and evening gowns 4,000 euros, is suffering more than others in the industry.

Richemont , the world's No. 2 luxury goods maker, posted forecast-beating first-quarter sales in July thanks to strong demand from China and Hong Kong.

At Escada, however, third-quarter EBITDA fell much more than the market had expected, to 1.9 million euros from 15.5 million euros in the same period last year.

Sales slipped 14.3 percent to 134.6 million euros.

"Declining sales are primarily due to heightened consumer restraint in key markets, which in turn is the result of a further worsening of economic conditions in the third quarter," the company said.

Consumers in Germany, Europe's biggest economy, are tightening their belts amid relatively high inflation and growing wariness about the implications of the credit crisis.

Karstadt department store operator Arcandor is facing difficulties setting up fresh financing and extending existing credit lines as a gloomy outlook weighs. (Reporting by Eva Kuehnen; Editing by Hans Peters)

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