Character Group estimates that sales of toys such as Go Go Hamsters, Peppa Pig, Scooby Doo and Bob the Builder will be heavily discounted.
The retailer – one of the country's biggest – warned of a high street 'bloodbath'.
Boss Richard King said: "This is going to be the toughest Christmas since Woolworths collapsed in 2008. Demand is down by up to 20 per cent."
He said the firm was 'struggling' but hoped to hit back next year with toys based on the online Bin Weevils virtual pets.