Escada goes bankrupt

On August 13^th, the German company Escada AG filed for bankruptcy in Munich local court. This was the conclusion of months of financial negotiations as the company market contracted and the debt exploded. Bloomberg said “Escada wanted 80 percent of bondholders to exchange old debt for new notes and only received backing from about half of investors. That derailed a plan to obtain a bank loan and raise new capital, forcing the company into insolvency.”

Escada bankrupt
The company said a number of restructuring measures had been contingent on the bond swap success, but it did not get enough support from the shareholders. For example, a plan to raise EUR 30 million through the company’s biggest investors was contingent on the bond exchange going trough, as was a credit extension of more than EUR 13 million.

Escada bankrupt
Out of fashion, out of business

Escada’s fall started after 1992, when the owner and chief designer Margaretha Ley died. Since, many executives and shareholders followed one another without finding the solution to boost the company.

Escada bankrupt
Instead of building a global brand such as Gucci, Burberry or Prada, the executive staff restricted the company on the sole segment of women ready-to-wear. While the competitors generated a very profitable business in leather goods, shoes, accessories and perfumes, Escada was struggling with the constraints of stock management in ready-to-wear.

In terms of image, the company did not regenerate and was perceived as quaint. When a young generation of designers arrived in the 90’s (Tom Ford, Christopher Bailey, Stella McCartney) with new style proposals, Escada kept on doing the same clothes without any possible brand identification. Even the double-E logo looks like a counterfeited logo of Chanel or Gucci. Not mentioning the brand identity in the shops with a very middle range look when competitors massively invested in renovating their own shops and creating impressive flagships all around the world. In a world of brand recognition, image deficit is a killer.

Last but not least, the group multiplied the shop openings without measuring the size and profitability. And if the executive staff invested in Russia, emerging markets such as China remain unexplored.

Escada bankrupt
An international company

Escada was founded in 1976 by a Munich couple Wolfgang and Margaretha Ley.
Escada bankrupt
The German company, specialized in women's apparel, met success by selling colorful, highly decorated sportswear.
scada bankrupt
Margaretha Ley, who was a former model of Parisian designer Jacques Fath, remained chief designer of Escada until her death in 1992.
scada bankrupt
In May 2009, the company sold its mid-market subsidiary Primera which included the brands Laurel, Cavita, Apriori and Biba. Primera weighted 36% of the group activity and employed 1,800 persons out of 4,027.
Escada bankrupt
Today, Escada operates 182 of its own shops and 225 franchise shops in more than 60 countries, employing about 2,200 people – 600 of whom are in Germany.
scada bankrupt
In the fiscal year 2008, the company posted EUR 528 million in sales but a net loss of EUR 70 million. In the first half of the fiscal year ending in April, it lost EUR 90 million.
Escada bankrupt
Escada operates 182 of its own shops and 225 franchise shops in more than 60 countries, employing about 2,200 people – 600 of whom are in Germany.
scada bankrupt
The company biggest investors include Russian millionaire Rustam Aksenenko (20.9% of the stock) and German billionaires Wolfgang and Michael Hertz (12.5% of the stock).

Yvon Le Gall

Luxury-world

http://www.escada.com/