Shares in the iconic British retailer Mothercare plunged by a dramatic 10 per cent on Tuesday, 23 December 2025, after the company issued a stark warning that its ability to continue trading is in "significant doubt".
Loan Breach Triggers Financial Crisis
The alarming update came as Mothercare revealed it had breached a critical condition of an emergency loan agreement. The AIM-listed firm had secured an £8 million rescue package from investment firm Gordon Brothers in October 2024, a deal intended to manage a daunting £19.5 million debt with a 13 per cent interest rate.
As part of that lifeline, a key safety covenant required Mothercare to maintain a minimum cash balance of £2.6 million. However, following a severe hit to its finances, the company has fallen below this threshold. This technical default means the entire loan is now "repayable on demand," placing Mothercare at the mercy of its lender, which could call in the debt at any moment.
Sales Slump and Partnership Loss
The cash crisis follows a punishing period for the retailer's core UK operations. Mothercare suffered a 25 per cent drop in sales in the first half of the financial year, with revenue plummeting 45 per cent to £11.6 million. This collapse was largely driven by the end of its lucrative five-year exclusive partnership with high-street pharmacy giant Boots.
In its official results, the company's board delivered a grave assessment: "We have concluded that, in this situation, there is a material uncertainty that casts significant doubt that the group will be able to operate as a going concern." It further warned that if trading conditions worsen, it would be "unable to meet liabilities as they fall due" without securing new funding.
Pivoting to India for Survival
Amid the turmoil in its home market, Mothercare's strategic future is increasingly tied to a bold venture in India. The company recently entered a joint venture with Reliance Brands, a subsidiary of the conglomerate owned by billionaire Mukesh Ambani.
Under the deal, Reliance paid £16 million in cash for a 51 per cent stake in Mothercare's brand rights across South Asia. This cash injection was used to slash the retailer's UK bank debts. Mothercare retains a 49 per cent stake, entitling it to nearly half of future profits in the region without the burden of operational costs like rent, wages, or utilities.
Reliance has ambitious plans, aiming to open 50 new Mothercare stores in India in 2026 alone. While current sales from India are between £18-24 million, the partners have set an audacious target of reaching £300 million in sales within five years, banking on the country's booming middle class to secure the brand's long-term survival.
