Gary Klesch, who heads the group, said: "We think it is undervalued and the image is a little shabby. But if we invest a little money and improve the stores we think the brand can be expanded both in Britain and internationally.
"A lot of streamlining has been done there with the closing down of loss- making shops some 15 months ago. I would hope to see the business recover within the next two to three years."
Mr Klesch's organisation, which specialises in the acquisition of distressed assets , has now bought four of five companies from receivership. Others include Zwebber, the art book shop chain which has a branch on London's Charing Cross Road.
Simon Freakley of administrators Buchler Phillips said he was pleased to have sold Knickerbox as a going concern and said there had been strong interest in the group. He said he received six offers for the business as a going concern. Other interested buyers are thought to have included the Tulchan Group, which owns Sock Shop and Shami Ahmed, who runs the Joe Bloggs fashion empire.
Knickerbox directors called in the administrators days before Christmas blaming poor sales. The company was 49 per cent owned by Gieves, the publicly quoted Savile Row tailor. It paid pounds 700,000 for its stake in February 1996. Knickerbox was founded in the mid-1980s by the former Marks & Spencer buyer Janie Godber and her husband Stephen Schaffer. It was loss-making last year on sales of around pounds 12m.
- Nigel Cope