A source close to Gray confirmed that she has been in discussions with Deloitte, which is handling the sale of 150-store chain MK One after it was put up for sale by Baugur last week.
It is unclear whether Gray would merge the pair under one name or retain two brands. Both options would deliver economies of scale, such as combined purchasing.
Another source argued that adding “a few hundred” stores to Ethel Austin’s portfolio would be feasible, because it has the “overhead base to cope with the additional stores”.
Separately, Ethel Austin’s former chief executive Simon Cooper criticised the decision to put the retailer into administration last week – resulting in the closure of 33 stores and 446 job losses at store and head office level – a day after Gray bought the troubled company’s debt.
Cooper said: “Everyone was very surprised and, had they had more warning, may have been able to put arrangements in place. People’s lives have been made a misery.”
However, Gray told Retail Week: “It is a tragedy that a business with the heritage of Ethel Austin faced such a bleak future.
“I have taken an interest in Ethel Austin. Both the turnover and margin have dropped rapidly very recently and putting the business into administration was the only viable option.”
Up to 40 parties have shown interest in Ethel Austin – whose 267 remaining stores are still trading – according to administrator Philip Duffy of Menzies Corporate Restructuring.
MK One said it has received expressions of interest from a number of parties.