Escada needs financing to survive the crisis

Romanita Ivan, the local designer, who owned the Escada Couture franchise in Romania for five years, until 2007, told Business Standard that the drops registered by the luxury producer are caused by the current economic context, and by the radical changes suffered by Escada once its majority share package was sold to a multinational holding with Russian and American shareholders.

“The Escada business is sliding globally, in line with the drop in purchasing power that all the world’s markets are facing. At the same time, the decline in sales and implicitly, in company revenues, can be a result of the radical change that the brand was subject to at the beginning of 2007, when the brand with a 30-year tradition moved to more vulnerable ground,” Ivan said.

Analysts on the German market advise Escada’s management to look for new investors to maintain the current capital of €71.5 mln. “Escada must find a financer to overcome the difficult period ahead,” said Christian Douglas, DZ Bank analyst.

The company’s 2009 business strategy is not consider cutting prices, which will continue at an average of €5,000. “We expect the first positive signs for Escada’s business to appear no sooner than the second half of 2009,” according to an official statement by the company. The Bain&Co consultancy company estimated that the luxury market will decline 3-7 percent due to the current crisis, from €175 billion estimated for 2008.