Toys R Us has announced plans to shut at least 26 stores in the UK, placing around 800 jobs – a quarter of its workforce – at risk in the weeks before Christmas.
The company, which has been loss-making for several years amid a string of pressures from expensive, largely out-of-town shop premises to strong competition, said there would be no changes over the crucial festive season.
But it said that during next year it would move to "transform" the business and bolster profitability by instigating a Company Voluntary Arrangement (CVA) with creditors.
Its update followed a story by Sky News last week that reported an announcement was imminent.
The toy chain, whose parent company filed for bankruptcy protection in the US in September, currently employs 3,200 in the UK and operates 84 stores.
Toys R Us said it aimed to begin closing UK stores from the spring and it would look to redeploy staff to its smaller, "more interactive" stores though redundancies were likely.
The company's UK managing director, Steve Knights, said: "All of our stores across the UK remain open for business as normal through Christmas and well into the New Year.
"Customers can also continue to shop online and there will be no changes to our returns policies or gift cards across this period.
"Like many UK retailers in today's market environment, we need to transform our business so that we have a platform that can better meet customers' evolving needs.
"The decision to propose this CVA was a difficult one, but we (are) determined it is the best path forward to make essential changes to the business."
Toys R Us said the CVA would involve not only comprehensive operational changes but also financial restructuring.
Commenting on the impact on staff, Mr Knights added: "We recognise this process will affect many of our team members and their families, so we are committed to keeping all of our staff informed throughout this process.
"Our teams will continue to play a key role in turning our business around."
Dave Brandon, the group chairman and chief executive, said the announcement affected its UK operations only.
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He said: "As we continued to work through the financial restructuring process, we made the decision to take action to put our UK operation on stronger financial footing.
"Through the CVA process, we hope to receive authorisation to restructure our UK lease obligations so that we will be better able to invest in our UK business and further improve the customer experience.