Elaine McPherson

Elaine McPherson describes the placing into administration of Ethel Austin in April, before she completed her acquisition of the discount fashion chain the following month, as a "necessity, not a plan".
The banks that owned Ethel Austin – Credit Suisse, Eon and ABN Amro – had been looking to offload the business and, EN understands, were considering appointing administrators themselves.

Insolvency practitioners Menzies Corporate Restructuring suggested to the owners that they sell their £18 million debenture to McPherson. Having bought it she became the senior creditor and, seeing how much money the failing Knowsley-based company was losing, called in the debt herself – effectively saving the former owners' blushes.

"There's nobody could have saved that business where it was. It always had to go into administration," she says. "And it was a business that had been offered to everybody. Everybody knew that it was in trouble." So Phil Duffy of Menzies was appointed as administrator in April this year. Having shed 181 head office jobs and closed a number of loss-making stores, he put the business up for sale, and in May McPherson bought it back for £8 million – £1 million more than the next-highest offer.

This was, with the exception of the percentage allocated to unsecured creditors, "circular money", according to Duffy. And, although McPherson didn't get all her money back as debenture holder, she still reckons it was a great buy. "In 2004 it was sold for £120 million, so I think I've done rather well," she enthuses. A few million quid for a £150 million turnover business with more than 270 stores and no borrowings – it's no wonder she's excited.

McPherson, though still in her thirties, can claim to be a veteran of the sector, having been "Sir Philip Green's right hand girl" at value fashion chains What Everyone Wants (where she started out as a buyer) and MK One. "MK One was losing money hand over fist when we got involved," she says. "It was losing round about £3.5 million when we bought it out of administration." That was 1996. In 2003 McPherson and finance director David Thompson bought out Sir Philip's stake and, a year later, sold the business to Icelandic group Baugur for £55 million.

This gave her the wherewithal to acquire Ethel Austin and, also in May, the 46-strong Glasgow-based bargain homewares chain Au Naturale – a business she says was contributing £8 million a year to the bottom line of its parent, Au Nat, before it found itself in the hands of administrators PwC. She says that, while she has no plans to merge the two businesses, she will be introducing some Au Naturale lines to Ethel Austin. She also reckons that both chains are ideally-placed to cash in on the credit crunch.

"Can I tell you what?" she says. "People trade down. So in actual fact the people at the value end of the market will suffer less. And, more importantly, I intend to give the Ethel Austin customer and the Au Nat customer better value – as in nicer quality."

Ethel Austin will go head-to-head with the likes of Primark, she explains, saying that the discount giant holds no fears for her: "Primark... sometimes when you're a huge machine you can't move, you don't have the flexibility, whereas I've got lots of flexibility. And it's not owned privately, so those issues all have an impact on what you can and cannot do.

"We've had some encouraging responses to lots of the new product areas, and it's about knowing your customer and bringing in your new customers and giving them what they want." She also believes Ethel Austin's local high street locations will prove a key strength. "The fact that it is in neighbourhood locations, for me, is sensational, because people going to Primark have to actually travel to city centres," she explains.

"Ethel Austin is in a neighbourhood location. They can walk. If you look at the statistics they're saying that footfall's dropping at some of the retail parks now because people aren't getting in their cars because of the price of petrol. So Ethel Austin is in a really good position to take advantage of the current climate."