Retailer Toys R Us UK has collapsed into administration, putting 3,200 jobs at risk, after last-ditch rescue attempts failed.
Administrator Moorfields Advisory has started an "orderly wind-down" of the company's stores after the embattled firm failed to find a last-minute buyer to save the business.
Toys R Us is one of the UK's biggest toy retailers, with 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 owed to lenders.
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.
Simon Thomas, Moorfields partner and joint administrator, said: "We will be conducting an orderly wind-down of the store portfolio over the coming weeks.
"All stores remain open until further notice and stock will be subject to clearance and special promotions. We're encouraging customers 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."
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.
Efforts to find a buyer fell flat and the firm was forced to call in the administrators.
Mr 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.
"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."
All stores will continue trading until further notice and much of the stock will be subject to clearance discounts and other special promotions, Moorfields confirmed.
Gift cards and vouchers will be honoured while the stores continue to trade, but customers are being encouraged to redeem vouchers as soon as possible as stores may close without notice.
No more gift cards will be sold from today.
Meanwhile electricals chain Maplin, which has branches in Ireland and the UK could also call in administrators today.