Sky News has reportedly learned that Toys R Us is planning to announce the closure of 25 of its 105 UK retail stores on Monday, reducing its UK retail force by almost a quarter as part of a company voluntary arrangement.
The move will require the approval of a 75 per cent majority of the company's creditors and places hundreds of jobs at risk.
The affected stores will continue trading throughout the Christmas season and on into the new year, said sources, who also confirmed that Alvarez & Marsal, a specialist adviser on corporate insolvencies, would handle the CVA proposal.
Toys 'R' Us's larger out-of-town stores are expected to be disproportionately affected by the closure plan, owing to their weak performance. Sources stated that the larger stores are simply too large to continue to run profitably and the firm's UK operations have been understood to be loss-making for that last eight years.
The move follows in the footsteps of other retail chains BHS, Focus DIY and JJB Sports who have all used CVAs to exit loss-making stores, although all three companies ultimately succumbed to closure.
It was unclear whether Toys R Us's landlords and other creditors would be prepared to back the proposal, further details of which will become clear next week.
Toys R Us currently employs roughly 3200 workers in the UK.