High street fashion chain Edinburgh Woollen Mill (EWM), which owns Peacocks and Jaeger, is set to go into administration, according to court documents.
The company is searching for a buyer, with around 24,000 jobs at risk, according to documents filed with the High Court.
EWM has lodged a notice of intention to appoint administrators to look for potential buyers to shore up the struggling business.
Bosses wrote to staff on Friday morning, warning them that the national and local lockdowns had hit sales very hard.
The company added that it has been damaged by allegations, which it denies, that the retailer and several rivals failed to pay some Bangladeshi suppliers during lockdown in an attempt to cut costs for clothes they were unlikely to sell.
The move by EWM, owned by businessman Philip Day, will see insolvency specialists at FRP spend 10 days carrying out an urgent review ahead of further action.
All stores will continue trading and further details will be announced in due course, the company added, but significant changes are expected.
EWM chief executive Steve Simpson blamed false rumours and the coronavirus pandemic.
"This situation has grown worse in recent weeks as we have had to deal with a series of false rumours about our payments and trading which have impacted our credit insurance", he said.
"Traditionally, EWM has always traded with strong cash reserves and a conservative balance sheet, but these stories, the reduction in credit insurance, against the backdrop of the lockdown and now this second wave of Covid-19, and all the local lockdowns, have made normal trading impossible."
Mr Simpson said they would move to appoint administrators after "short breathing space".
"Through this process I hope and believe we will be able to secure the best future for our businesses, but there will inevitably be significant cuts and closures as we work our way through this", he said.
"I would like to thank all our staff for their amazing efforts during this time and also our customers who have remained so loyal and committed to our brands."
An FRP spokesman said: "Our team is working with the directors of a number of the Edinburgh Woollen Mill Group subsidiaries to explore all options for the future of its retail brands Edinburgh Woollen Mill, Jaeger, Ponden Home, and Peacocks."
The move came just hours before Chancellor Rishi Sunak was expected to unveil new plans for protecting jobs and businesses hit by the second wave and new measures.
