Mk One gears up for expansion

Budget British retailer MK One was gearing up for a major expansion today after Icelandic group Baugur confirmed it had bought the chain in a deal worth £55m (€78.8m).

The 176-strong chain of fashion stores was sold by a trio of business people including billionaire Bhs owner Philip Green.

Mr Green will receive more than £4m (€5.7m) from the sale of his stake, while managing directors Elaine McPherson and David Thompson will share a windfall of £40m (€57.3m).

Oasis-owner Baugur plans to add more than 50 MK One new stores in the next two to three years – and believes there is potential for up to 400 sites.

MK One is positioned in the value end of the clothing market, targeting women in the 15 to 35 age bracket, while its Sophie brand sells to girls aged between 7 and 15.

In spite of competition from supermarkets and high street rivals in discount fashion, it posted underlying earnings of £14.8m (€21.2m) on sales of £139m (€199.1m) in its last financial year.

New chief executive Les Johnston, part of a senior management team brought in by Baugur, said: “This deal provides us with the opportunity to take the company on to a new level and maximise its tremendous potential.”

The deal is the latest in a series of raids on the UK high street that has seen Baugur snap up chains such as Karen Millen, Goldsmiths and Coast.

Under the deal, Baugur has a 46% stake in the company, Icelandic bank Landsbanki holds 36% and the new management team has the remainder.

Baugur said the move represented a breakthrough into the value sector of the UK fashion market, which is growing three times faster than the rest of the clothing market.

“We intend to take a greater role in this sector,” the company added.

Last week it emerged discount chain Primark had lifted annual profits by 23% and increased like-for-like sales by 6% as demand rose for cheaper high street fashion.

Supermarkets such as Tesco have also been among those to cash in on the expanding sector.