An overseas suitor offering to solve all a retailer’s financial woes sounds like a dream, but on closer inspection, the American retailer keen to buy Mothercare could be a frog rather than a prince.

An overseas suitor offering to solve all a retailer’s financial woes sounds like a dream, but on closer inspection, the American retailer keen to buy Mothercare could be a frog rather than a prince.

Destination Maternity is described as the largest US maternitywear retailer, with a market share of 35% to 45%. It has 577 stores and a presence in 2,800 retail locations, such as department stores, so it certainly has mass in the maternitywear niche. But its recent performance suggests it is in a similar predicament to struggling Mothercare.

Destination Maternity’s share price has plunged 30% in the year to date on the back of a profit warning in April. The retailer, which posted an operating income drop from $9.7m (£5.65m) to $7.5m (£4.37m) in its first half, expects profits to be down between 2% and 9%.

Much like Mothercare, Destination Maternity is closing stores. It has been through “significant restructuring” in recent years according to Liberum analyst Sanjay Vidyarthi, and plans to close 49 to 54 stores over the year.

Destination Maternity’s overseas portfolio is not as big as that of its UK counterpart and it recently closed its Indian franchise stores after it failed to agree renewal terms.

Mothercare chairman Alan Parker maintains: “Mothercare has a very strong and valuable international business and significant potential for sustained improvement in the UK.”

Vidyarthi says: “In this light, the rationale for the combination is not clear-cut in terms of what Destination could bring to Mothercare regarding the issues it faces in the UK - too many stores, intense price competition and gross margin pressure.”

There are also questions about how Destination Maternity would raise the cash for a deal. Mothercare said it has “significant concerns about the deliverability of these proposals” and uncertainty over the proposed financing arrangement.

It appears that Destination Maternity might not be a gallant white knight that can ride to the rescue of Mothercare, but rather an equally embattled player. That could make the retailers uncomfortable bedfellows.