Official data last week showed cold weather in May prompted the biggest drop in retail sales this year, with the wet weather in June continuing to hurt many retailers.

Bonmarche, selling budget fashion for the over 50s from over 300 stores, had previously rejected the offer made in April through Day's Spectre Holdings, which was pitched at a discount of nearly 29% compared with Bonmarche's closing price of 16 pence on Tuesday.

But the retailer said on Wednesday the price is now "fair and reasonable" after trading in the first quarter was 'poor'.

"The increase in uncertainty that has developed reflecting the trading and financial position of the business during the first quarter of the financial year makes the certainty represented by the offer potentially more attractive in the short term," Bonmarche said in a statement.

The retailer had warned on sales as early as March as it discounted heavily to clear unsold apparel.

Shares in the company fell as much as 27% on Wednesday, knocking its value down to 5.5 million pounds at Wednesday's low of 11 pence from a peak of 1.59 billion pounds in 2015.

"LAST MAN STANDING"

"Bonmarche has simply capitulated without consulting majority shareholders," said Paul Mumford, a fund manager at Cavendish Asset Management, which has a 10.8% stake in Bonmarche.

"Given that Debenhams, M&S and House of Fraser are disappearing from the high street, Bonmarche was in a good position to be the 'last man standing', meaning we could have seen an increase in footfall," Mumford said.

Bonmarche also said it had been told by its auditor PwC during informal talks that without a clear indication of trading having improved by the end on July, it may have to include a line in the audit report to show it was concerned about the company being able to operate as a going concern.

Founded in 1982, Bonmarche said cost cuts meant it had sufficient liquidity which was supported by its bank facilities.

The company has been struggling recently as consumer spending has dried up and more people shop online. It has been forced to discount and sacrifice profits for sales. Its shares have plummeted 70% so far this year.

Through Spectre, Day is Bonmarche's biggest shareholder with a 52.4% stake. Spectre made the offer to buy Bonmarche's remaining shares for 11.445 pence per share after it finalised buying some Bonmarche shares from another of its investors.

Day, who owns high-street retailers such as Peacocks, Jaeger, Jane Norman and Austin Reed, has in the past also made a bid for retailer House of Fraser, which was eventually bought by Sports Direct owner Mike Ashley.

(Reporting by Pushkala Aripaka and Noor Zainab Hussain in Bengaluru; editing by Bernard Orr/ Elaine Hardcastle and Emelia Sithole-Matarise)

By Pushkala Aripaka and Noor Zainab Hussain