Mothercare PLC (LSE: MTC) narrows losses but warns scale must return as Boots exit and Middle East hit sales

Mothercare PLC reported a 25 percent drop in worldwide retail sales during the first half of FY26, with revenue falling to £90.7 million as the company faced continuing fallout from store closures in the Middle East and its planned exit from its UK distribution partnership with Boots. Despite the sales decline, the company managed to shrink its adjusted loss before tax to £1.1 million and slashed its net debt to £5.8 million, suggesting a stabilised yet diminished operation. With its UK business in transition and geopolitical pressures weighing on core markets, Mothercare is placing increasing emphasis on new partnerships with Reliance Brands Limited in South Asia and Ebebek Mağazacılık A.Ş. in Turkey as the foundation for renewed growth.

How much of Mothercare’s sales decline is structural versus transitional—and why the Middle East and Boots matter more than ever

The 25 percent year-on-year fall in franchise retail sales masks a deeper structural issue: over the past three fiscal years, Mothercare’s global retail footprint has shrunk by nearly 40 percent. Store count fell from 562 locations in 2022 to just 344 as of September 2025. In parallel, retail square footage decreased to 858,000 from over 1.3 million square feet. The steepest contraction has been in the Middle East, where the company has long relied on a broad franchise network to deliver a significant portion of its sales. Ongoing regional unrest and changing consumer behaviour have triggered the closure of 50 stores in the past 12 months alone. Mothercare has now acknowledged that most of its older inventory in the region has been cleared, with remaining partners starting to report modest profitability improvements. However, without new growth injections, revenue is unlikely to recover to historical levels in the region.

The planned exit from the longstanding Boots UK distribution arrangement further compounds the shortfall. This exclusive partnership was a key anchor for Mothercare’s visibility and sales in its home market. The company has now confirmed that the Boots deal is ending imminently, with no comparable UK-wide retail distribution announced to replace it. With both Middle East and UK channels weakening simultaneously, the underlying scale of the Mothercare brand has diminished more than headline figures suggest.

What Reliance and Ebebek bring to the table and why these partnerships are central to Mothercare’s survival strategy

Mothercare is now leaning heavily into two new international agreements that it believes could help restore critical mass and unlock latent value in its brand. The most high-profile of these is its joint venture with Reliance Brands Limited, the retail arm of Reliance Industries Limited. The venture, announced in late 2024, granted perpetual brand rights to Reliance for India, Nepal, Sri Lanka, Bhutan and Bangladesh. Mothercare retains a 49 percent equity stake in the newly formed JVCo 2024 Ltd. Retail sales in India during FY25 stood at £18.6 million, down from £24 million the previous year under a different model. However, Reliance has communicated an ambitious roadmap targeting £300 million in sales within five years, backed by plans to open 50 new stores in 2026 alone.

Although the revised deal structure offers lower royalty income compared to legacy franchise arrangements, Mothercare expects to benefit from increased sourcing fees and future value realisation from its minority stake in JVCo. These sourcing revenues could become especially important as the company aims to monetise its operational gearing. In essence, Mothercare is betting that Reliance’s retail muscle and vertical integration will deliver higher volume at lower cost, providing a new backbone for the brand in the region.

The second pillar of its recovery plan is the 10-year licensing agreement with Ebebek Mağazacılık A.Ş., the leading mother-and-baby product retailer in Turkey. With around 280 stores and an online business generating over £400 million in revenue, Ebebek has started launching Mothercare-branded products, with a full in-store rollout expected by spring 2026. The deal also grants Mothercare the right to rebrand Ebebek-designed products for sale in other markets, potentially creating a new product sourcing stream that benefits both partners. Ebebek’s interest in expanding the licensing agreement to additional territories further supports Mothercare’s ambition to scale back up through targeted international leverage.

How covenant breaches and pension contribution delays are shaping Mothercare’s capital strategy

Despite stabilisation at the operating level, Mothercare’s capital structure remains under stress. The company breached the liquidity covenant on its £8 million term loan with Gordon Brothers, a facility that replaced a previous £19.5 million loan at more punitive rates. While Gordon Brothers has not yet demanded immediate repayment, management acknowledged that the lender would prefer an earlier settlement than the facility’s maturity date of October 2026. Mothercare has engaged its pension trustee, which holds a secondary charge, to explore a potential investment or short-term financing solution. Broader financing options, including stakeholder equity injections or refinancing alternatives, are also under consideration.

The company continues to benefit from forbearance by its pension trustee. Contributions totalling £3 million for the current fiscal year have been deferred until March 2026, with repayments scheduled to resume from April 2026. These cash conservation measures are vital for preserving optionality as Mothercare navigates strategic negotiations and attempts to scale its royalty income through international partners.

Mothercare forecasts generally neutral cash flows over the next twelve months, buoyed by rising income from its Turkish and South Asian operations. However, its ability to improve liquidity further or access non-dilutive capital may hinge on how quickly its partners deliver sales growth at scale. Any delay in rollout by Reliance or Ebebek could weaken Mothercare’s refinancing hand, making it more reliant on equity dilution or asset sales.

What investors and stakeholders should watch as Mothercare prepares for the next strategic phase

Mothercare’s board has yet to appoint a new chief executive officer, and day-to-day operations continue to be managed by the chief financial officer and the operating board under the oversight of Chairman Clive Whiley. While management continuity may be stabilising in the short term, the absence of a permanent chief executive officer during a high-stakes turnaround could hinder negotiations with investors, lenders, or prospective partners. The board has indicated that the appointment will likely emerge from ongoing strategic discussions, suggesting that the next phase of growth will be closely tied to a broader capital or operational restructuring.

Additionally, changes to UK Listing Rules that removed the requirement for shareholder approval of material transactions have raised governance concerns. Mothercare’s board has argued that these rule changes disproportionately empower lenders, particularly in distressed or turnaround situations, and weaken equity protections. If the company pursues an equity-linked financing solution or asset-backed refinancing, this imbalance could become more prominent in negotiations with stakeholders.

The broader retail context adds further complexity. Mothercare is trying to reposition itself as a global brand licensor rather than a traditional retail operator. This approach works well in high-margin markets where partners like Reliance and Ebebek can deliver scale. But in lower-growth or politically volatile regions, the model offers less protection, as seen in the Middle East. Moreover, without a strong UK or Western European presence, Mothercare’s brand equity risks further erosion unless it can reestablish visibility in those core markets.

What the future holds for Mothercare if Reliance and Ebebek succeed—and if they do not

If Reliance achieves even half its retail sales target for South Asia, Mothercare would be in a position to rebuild its scale, bolster its cash flows, and renegotiate its capital structure from a position of strength. Similarly, if Ebebek expands its Mothercare-branded product line across new territories, the company could generate meaningful royalty and sourcing revenue without major capital investment.

However, if either partner underdelivers, Mothercare could find itself squeezed between weak operating leverage and constrained financing flexibility. The decline in store count and turnover has already compressed the company’s options. With net debt now at £5.8 million, down from over £17 million a year ago, there is limited room for further deleveraging through cash generation alone.

Mothercare’s ability to monetise its intellectual property, supply chain capabilities, and licensing agreements will likely determine whether the brand remains a niche legacy player or stages a credible comeback in the global baby and maternity retail sector. For now, management remains optimistic that new partnerships will restore critical mass and eventually justify a return to dividend payments, which have been suspended since 2012.

Key takeaways on what Mothercare’s interim results mean for its recovery, partnerships, and debt outlook

• H1 FY26 retail sales fell 25% to £90.7 million, driven by Middle East store closures and the end of the Boots partnership in the UK.

• Adjusted EBITDA dropped to £0.8 million, with group turnover halving to £11.6 million from £21 million in the previous year.

• Net debt reduced significantly to £5.8 million, but Mothercare breached its debt covenant with Gordon Brothers, who may demand early repayment.

• The Reliance Industries joint venture in South Asia and Ebebek licensing in Turkey are seen as core growth engines from 2026 onward.

• Reliance plans to scale to £300 million in retail sales in five years, while Ebebek will roll out Mothercare products fully by Spring 2026.

• The company is deferring £3 million in pension contributions to conserve cash, with repayments resuming in April 2026 under a new agreement.

• Management is exploring new financing and equity-linked solutions, including a potential investment from the pension trustee.

• Execution risk remains high, but stabilizing cash flow and partner-led growth could restore scale and shareholder value if delivery meets ambition.