Swedish fashion retailer Kappahl Holding AB today (30 September) said it has negotiated a new three-year bank agreement and intends to raise up to SEK600m (US$87.4m) in a rights issue, after plunging to a fourth quarter loss.

The company, which operates 370 stores in Sweden, Norway, Finland, Poland and the Czech Republic, hopes to reduce its debt in the face of weak sales.

The plans were unveiled as the retailer swung to a loss of SEK54m in the three months to 31 August, down from SEK125m a year earlier.

Fourth-quarter sales were down 6.4% on the year to SEK1.208bn, from SEK1,290bn the year before, as products failed to resonate with shoppers. The gross margin fell to 54.0% from 59.6%.

"We have delivered a weak offer in a weak market," said president and CEO Christian Jansson. Our range has not sufficiently met our customers' expectations."

He also said inventory was an issue, with higher stock levels leading to higher markdowns.

"We were too optimistic regarding purchases and too late in running down inventories. During the quarter the composition of inventories has improved but we have more to do before we are content."

For the full year, KappAhl's net profit plunged 83% to SEK68m, down from SEK402m a year earlier. Net sales fell 2.7% to SEK4.97bn from SEK5.11bn last year.