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Value sector is hit by casualties

The value sector was rocked this week by the collapse of Ethel Austin and Internaçionale on top of Baugur’s decision to put MK One up for sale.

Suppliers to the value sector are likely to be hardest hit according to industry observers, who suggested both Internaç-ionale and MK One would struggle to attract buyers.

One industry observer said MK One would only be attractive if it was offloaded debt-free and with stock and a dowry.

“The performance of the business has been appalling and only 25% to 30% of the stores are any good. The signal is that it is game over for MK One. There doesn’t seem to be much interest in Internaçionale either.”

Another value retailer said suppliers were concerned about their ongoing relationship with MK One. “I’ve received calls from suppliers asking us to buy stock that was destined for MK One,” she said. However, MK One chief executive Dominic Galvin said the chain had paid its quarterly rents in advance and had enough funds to carry on trading.

MK One has also said it has funds to pay staff wages.

Steve Burden, director in corporate finance at Deloitte, which has been appointed to handle the MK One sale, said a mixture of trade and private equity players were interested.

Sources close to Ethel Austin said that Elaine Gray, the former chief executive of MK One, was preparing a rescue deal for the chain as Drapers went to press.

On Wednesday, Ethel Austin’s corporate administrator Menzies Restructuring closed 33 of its 300 stores.

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