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Mothercare is now finalising a rescue deal with creditors

Mothercare says it is finalising a rescue deal with its creditors after a run of years of falling sales and profits.

According to reports, the retailer is likely to undergo a company voluntary arrangement, which typically sees a retailer closing stores and renegotiating rents to prevent it from going into administration.

The news comes after the baby goods retailer slashed its profit forecast in January and entered talks with creditors to avoid breaching the terms of its loans.

Blame for the downfall of the maternity specialist has been attributed to a number of contributing factors such as competition from supermarkets such as Asda and Tesco, fashion retailers like Primark and H&M and Amazon and Argos.

Cost cutting measures taken by the retailer have also hampered the retailer’s ability to adapt to the evolution of the consumer demand and shopping habits, while its rapid expansion during its healthier days may have led to an unmanageable slate of big stores.

Over the last four years Mothercare has reduced its store portfolio from 200 outlets to 137, but it is still struggling to pay rents.

Mothercare’s rescue deal could go some way towards fixing these problems, according to analysts.

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