Retailer Toys R Us has fallen into administration, putting 3,200 jobs at risk.
A last-ditch rescue attempt to find a buyer failed and administrator Moorfields Advisory has started an “orderly wind-down” of the company’s stores.
Toys R Us has more than 100 stores in the UK and 1,500 in 33 countries across the globe.
The firm was grappling with a £15 million tax bill as well as money it owed to lenders.
All stores will continue trading until further notice and much of the stock will be subject to clearance discounts and other special promotions.
“Whilst this process is likely to affect many Toys R Us staff, whether some or all of the stores will close remains to be decided,” Simon Thomas, Moorfields partner and joint administrator, said.
“We have informed employees about the process this morning and will continue to keep them updated on developments. We are grateful for the commitment and hard work of employees as the business continues to trade.”
No more gift cards will be sold from Wednesday.
Customers are being encouraged to redeem their gift cards and vouchers as soon as possible.
“We will make every effort to secure a buyer for all or part of the business,” Thomas added.
Toys R Us has struggled with cash flow pressures after sales were squeezed by worse-than-expected trading over the crucial Christmas period.
In addition, falling consumer spending, soaring inflation and competition from online rivals have dented performance in recent years.
Toys R US announced a Company Voluntary Arrangement (CVA) at the end of last year in an attempt to shore up its financial position by allowing it to shut loss-making stores and secure deep discounts on rental costs.
The restructuring plan won the approval of 98% of creditors in December, and had the backing of the Pension Protection Fund (PPF).
Its pension fund is set to be taken over by the PPF.
It was also announced on Wednesday that electricals retailer Maplin has gone administration, putting a further 2,500 jobs at risk.
Rebecca Long-Bailey, Labour’s shadow business secretary, said the news of job loses at Toys R Us and Maplin was “devastating”.
“This latest shock in the retail sector continues a worrying trend for our shopping streets and centres,” Long-Bailey said.
“The government must urgently meet with both the unions and the companies to ensure that these jobs are safeguarded.
“Workers are suffering stress and anxiety not knowing what the future holds for them. In the event of job losses, the government must act quickly to ensure all workers receive swift redundancy payments and are properly supported.
“The government must also urgently address problems across the retail sector.”
Industry experts said that the collapse of Toys R Us is not unexpected.
Hannah Maundrell, editor in chief of money.co.uk, said: “It’s sad but unfortunately not surprising as we know they’ve been struggling to find a buyer.
“It’s undoubtedly distressing news for employees of Toys R Us especially because their fates have been uncertain for so long. Unfortunately they aren’t the only retailer that has been struggling.
“Anyone who is worried about the future of their job should prepare themselves now. Check what redundancy rights you have and dig out any income or mortgage protection policies you hold just in case.”
Richard Lim, chief executive of Retail Economics, said: “All is not well on UK high streets. The perfect storm of spiraling operating costs, softer consumer demand, and seismic structural changes has claimed another victim.
“Put simply, the retailer was too slow to embrace omnichannel, were burdened with too many stores and failed to deliver a retail ‘experience’ good enough to stand out from their competitors.”