Escada Falls Most Since at Least 1998 on Forecasts
By Holger Elfes
April 10 (Bloomberg) -- Escada AG fell the most in at least 9 1/2 years in Frankfurt trading after cutting its profit and sales forecast because of a weaker market for luxury women's fashions and ranges' failure to appeal to shoppers.
Escada slid 22 percent, the most since at least October 1998, according to data compiled by Bloomberg. The shares' drop, which erased 55 million euros ($87 million) of market value, was today's second-biggest in the 50-company SDAX Index. Moody's Investors Service said it may cut the clothier's credit rating.
The clothier hired a new chief designer in October, four months after ousting its chief executive officer. The former CEO and Escada's main investor, Russian millionaire Rustam Aksenenko, disagreed on strategy, according to press reports. The Munich- based company lowered the forecasts after private-equity firm Apax Partners Worldwide LLP opted against buying a stake.
"
The reception of the collections of the new designer does not really seem to improve," Michael Kuhn, an analyst at Deutsche Bank in Frankfurt with a "
hold" recommendation on Escada, wrote in a research report. "
Hopes for a quick recovery have evaporated."
Annual earnings probably will fall 25 percent before interest, taxes, depreciation and amortization, Escada said yesterday after German stock trading had ended. Sales will drop by a higher single-digit percentage, the clothier said, while net income will be "slightly" positive, compared with its prior forecast for low-single-digit growth.
Stock Retreats
Escada dropped 3.20 euros to 11.15 euros, closing at the lowest price since November 2003. Kuhn lowered his price estimate for the stock, which fell 9.8 percent yesterday, by 30 percent to 14 euros. The shares have slid 41 percent this year.
"
A weaker share price could make an entry of Apax or another financial investor more likely, but we don't expect discussions about this before the summer," Christoph Schlienkamp, an analyst at Bankhaus Lampe in Dusseldorf, Germany, wrote in a research report. Schlienkamp, who gives the stock a "
hold" rating, cut his share-price estimate by 15 percent to 14.50 euros.
Spending power is ebbing in Europe and the U.S. as growth weakens, inflation rises and higher living costs sap incomes, while sliding stock markets are weighing on consumer confidence. That's cutting into purchases of higher-priced versions of goods from clothes to vehicles at companies such as sports-car maker Porsche SE, whose North American sales slid 24 percent in March.
Too Dark
Escada, which was named after an Irish racehorse, reported a third straight quarterly loss in February after customers shunned its winter fashions. The collection was selling poorly because colors were too dark and tissues were too heavy, the company had said in December.
The clothier will stick to its strategy, spokesman Frank Elsner said today by telephone. Finartis, Aksenenko's Geneva- based investment company, still backs its current managers, said spokesman Max Hohenberg. Ira Wuelfing, a spokeswoman for Apax in Germany, confirmed yesterday's Escada statement and declined to comment further.
Moody's probably will finish reviewing its B1 long-term rating for Escada in "
the next few weeks," according to a statement released today on the credit-rating company's own news wire. The review affects about 200 million euros of debt.
Aksenenko, who owns a stake of about 25 percent, is the 33- year-old son of Nikolai Aksenenko, who served as Russian railways minister under presidents Boris Yeltsin and Vladimir Putin. Russia's Finans Magazin estimated Aksenenko's net worth at $150 million in 2007.
Escada hired former Valentino designer Damiano Biella as chief designer in October, four months after appointing Jean- Marc Loubier as CEO to succeed Frank Rheinboldt.
To contact the reporter on this story: Holger Elfes in Dusseldorf at [email protected].
Last Updated: April 10, 2008 13:03 EDT
