The Original Factory Shop is expected to close stores and negotiate cheaper rents as part of a rescue deal.
The retailer wants to trim its 220-store estate, The Sunday Telegraph reports, and will receive an extra £10m from private equity owner Duke Street Capital.
The Original Factory Shop, based in Burnley, reported a slight rise in turnover from £185m to £190m last year. However, profits fell by £3.1m from as a result of stock impairment.
A spokeswoman from Duke Street said: “The Original Factory Shop holds a unique position in the value retail sector, offering a ‘local’ shopping experience to communities across the UK, with exciting prospects for further growth.
“Duke Street has brought in a high calibre new team lead by Emma Fox, to implement the new ‘Journey to Growth’ strategy, with a key focus on investment in the core store estate to enhance the shopping experience, this will require a capital investment of c £10m into existing stores and to that end we are working with BDO to look at a range of different options for the business - all with a view to driving business growth and improvement. No decision has been made at this point as to the direction this will all take.”