Toys R Us has gone into administration, putting 3,000 UK jobs at risk.
Administrators have been appointed to begin “an orderly wind-down” of the UK’s biggest toy retailer following the failure to find a buyer.
They said that all 105 Toys R Us stores will remain open until further notice.
Joint administrator Simon Thomas said: “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.”
Toys R Us has been facing a £15m tax bill. However, poor sales have made it unlikely that it can make the payment.
Mr Thomas said: “We will make every effort to secure a buyer for all or part of the business.
“The newer, smaller, more interactive stores in the portfolio have been outperforming the older warehouse-style stores that were opened in the 1980s and 1990s.”
The UK arm of Toys R Us – its US owner filed for bankruptcy protection last September – managed to stave off administration in December after it struck an agreement with the Pension Protection Fund (PPF) to inject £9.8m into its retirement scheme over three years.
The tally of job losses may worsen if Maplin, the electronics retailer, also files for administration.
Maplin employs 2,500 workers and has been attempting to find a buyer for the struggling business, but it is understood that talks with a potential suitor have now broken down.
Analysis: Emma Simpson, business correspondent
Retail is tough right now, even for the strong players.
Toys R Us has made a loss seven out of the last eight financial years. It is a subsidiary of a US business which has been drowning in billions of dollars of debt.
Financially weak, Toys R Us has been unable to adapt to changing shopping habits.
These days, many shoppers don’t want or need to drive 20 minutes to a big out-of-town warehouse to buy toys.
Costs have been rising for all retailers and consumer demand has been softening. It’s a combination which is putting pressure on many retailers and the weaker ones are particularly exposed.
Toys R Us was once the disrupter, a so-called category killer. Now many are wondering if it can survive in the UK and in what form.
What does this mean for shoppers?
A large sale of remaining products at Toys R Us is expected. The administrators said this would happen in stores only, as the online service and click-and-collect will be closed immediately.
Shoppers who have ordered an item already on click-and-collect can still pick it up, but only if that item is still available in stock.
Anyone with Toys R Us gift cards and vouchers should spend them in stores as soon as possible before the shops are closed down. No more gift cards will be sold.
The retailer had a “take time to pay” service, which allowed customers to reserve a product and then pay for it gradually for 12 weeks, before picking it up. The administrators said these reservations would be honoured, provided that the outstanding balance was paid and the goods collected by 11 March.
Alternatively, customers can use their deposits towards the cost of any other item bought in a store by 11 March.