Baugur has ploughed£15 million in to MKOne after the fashion chain ran up losses of£21.4 million last year.
Like-for-like sales at the low-price retailer fell 22 per cent in the first five months of the year to January 27, before new management was parachuted in to turn the company around. Sales lifted by 1 per cent in the remaining seven months of the financial year.
Icelandic investment group Baugur, which owns a string of high street brands, including Hamleys and House of Fraser, owns about 60 per cent of MKOne. Landsbanki, one of the group’s bankers, owns about 40 per cent. It converted£38.7 million of debt into equity during the financial year.
Baugur, which bought MKOne for£55 million in 2004, has also had difficulties with its Mosaic brand. Earnings at Mosaic, which owns Oasis, Karen Millen, Ghost and Whistles, fell 13 per cent last year after floating on the Icelandic stock exchange. Baugur is poised to take the group private again.
MKOne has struggled in the face of tough competition from Primark and New Look, as well as the supermarkets which have upped their game in fashion. In July last year, Baugur drafted in Kevin Lyon as chairman and Dominic Galvin as chief executive of the fashion chain.
Galvin cut prices on basic lines by about 15 per cent and introduced more fashionable clothing and footwear, as well as cutting annual costs by£4 million. In the 20 weeks since the end of January underlying sales rose 10.3 per cent.
Galvin said he does not expect the retailer to break even for three to five years. As part of a£6 million investment agreed at the time of refinancing, Galvin will refurbish 60 stores. He will also close poorly performing stores.