Escada Business Problems: Store Closures, Limited Collections New Owner – WWD

Escada, the once high-flying brand synonymous with the big-shouldered Eighties and the “Dynasty” set, is said to be in increasingly bad financial shape. 

Only six months into new ownership under Regent LP, a Los Angeles private equity firm that officially acquired Escada from Megha Mittal last November, the brand has several retail fronts in North America closed and taken over by landlords; laid off or furloughed nearly its entire retail force (those on furlough continue to have paid benefits) and had its corporate headcount drastically reduced, including the likes of its chief executive officer and its chief financial officer. 

While some of these outcomes are indeed due to the coronavirus pandemic that forced nonessential retail to close for the last several months, sources have it that things were already looking grim in December and January. The corporate layoffs happened in December. A multitude of typical operating bills are said to have been piling up, more or less since since the acquisition, like payments to in-store seamstresses, UPS delivery services and even electricity for stand-alone retail stores. Internally, Regent is said by some to be investigating all expenses, but another view, as one industry source put it, is that “they’re letting the brand bleed out.”

In Regent’s November announcement on the acquisition of Escada, the company said it planned to take the business “to new heights.” When Mittal purchased the brand out of insolvency in 2009, it was said to be a “long-term investment.” While there were efforts to modernize the label and increase sales, the company is thought to have not been profitable since before it filed for insolvency.

Regent declined to comment on the financial position of the company.

Models in Escada at the Beverly Hills store opening party in 1991.  Bei/Shutterstock

Before Regent’s takeover, Escada was already struggling financially but sources said bills were being paid, unlike today. Regent’s round of layoffs at corporate headquarters in Germany are said to have reduced headcount by at least 50 people, but by some accounts it was by as much as 100 people. All corporate roles in the U.S. were eliminated as well, leaving roughly 150 corporate employees remaining in Germany, where Escada was founded in 1978 by Margaretha and Wolfgang Ley. There are also said to be about that many workers left at Escada’s factory in Slovenia.

One source suggested that Escada is facing a current loss of at least $100 million. In a Companies House filing in the U.K. for 2018, the last year Escada made its mandatory annual financial disclosure there, the company listed a loss of 7 million pounds, or $8.8 million at current exchange. That was just for operations in the U.K., however, where it has five points of sale, only one of which is a stand-alone store.

Since Regent took over there has been no indication of its strategy to get the brand back on track. At least three of Escada’s six stand-alone stores in North America, in Beverly Hills, Dallas and Vancouver, have just been taken over by landlords for failure to pay rent for several consecutive months. Other stores in the U.S. are thought to be facing closure as well for the same reason, although some are said to be planning on reopening as coronavirus measures are lifted.

To be sure, the pandemic has created a tense situation between many retailers and landlords, but to have a landlord change the locks on a storefront, as is the case with at least two Escada stores, is exceedingly rare.

Sources have said there are current talks happening internally regarding a further reduction of stores and wholesale here and in Europe, mainly dependent on whether landlords are willing to look past months of missed rent. Escada currently has 298 points of distribution, but a vast majority of that is wholesale or shop-in-shops with department stores like Nordstrom, Saks Fifth Avenue, Neiman Marcus and Harrods. The brand is expecting that part of its business to be severely impacted, sources said, with a number of department stores having their own financial difficulties and looking to downsize. One of Escada’s biggest wholesale accounts for many years has been Neiman Marcus, which recently filed for bankruptcy.

Partly due to the pandemic, Escada is also not expected to produce its fall 2020 collection in full, samples of which were shown to buyers and press in February. In fact, the brand is said to be abandoning the traditional collection model altogether. It will instead focus on smaller “capsule” releases multiple times a year, leading to a much pared-down offering when the brand starts production again. The same plan is said to be in place for sister line Escada Sport. Other luxury brands, seemingly in a stronger financial position than Escada, have also been pushing for a change to the current fashion production calendar.

When Escada’s new production timeline will begin is unclear, however, despite its last new shipment of spring 2020 hitting stores late last year. Some sources expect new product to come out at some point this year, but others have pointed to pre-coronavirus issues with payment to manufacturers, which could well impact any attempts at production for this year.

What this means for global design director Emma Cook, appointed just before Regent took over, is also unclear. She is said to be still under contract with Escada, but design plans going forward are said to be based around an idea of several different designers, possibly a new one for each capsule Escada puts out. Sources expect that when her contract runs out, thought to be later this year, her time with Escada will end and she will not be replaced.

Other high-level roles at Escada are also going unfilled. Chief executive Iris Elisabeth Epple-Righi left the brand in December after about two years, not to be replaced. General counsel Lars Schmidt also just left the company. Torsten Dühring came on in January as chief financial officer only to leave abruptly mere weeks later, not to be replaced. Sources said that he quit after refusing to hand over customer data without regard for strict European laws at the demand of Regent founder and ceo Michael Reinstein, who some say is now the de facto leader of Escada. He is currently only listed as chairman. Accounting and finance for Escada is said to now be handled by a shared services center in Manchester, England.

Regent would not specify who is running the day-to-day operations at Escada.

Reinstein has no direct experience in fashion or retail and is a lawyer by trade who started Regent in 2013. The firm has focused on acquiring distressed assets. His other acquisitions in recent years include mass lingerie brand La Senza from L Brands; Sunset magazine from Time Inc., and Regis Corp., which operated Vidal Sassoon and hundreds of mall-based hair salons. 

The Sunset and Regis businesses are said to have been dealt a very similar experience to that of Escada under Regent. Namely, little to no financial investment and “restructuring efforts” that turned out to be not much more than drastic cuts to size and costs that turned the companies into barebones operations.


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