HMV has confirmed it will call in administrators from Deloitte on Tuesday, as the 250-strong chain became the latest casualty of the shift to online shopping, putting 4,500 jobs at risk.
Stores were expected to open on Tuesday but the firm said it would not be accepting gift vouchers or issuing any more.
HMV held discussions with its banks over the weekend but failed to agree on new terms for its debt.
It said in a statement issued on Monday night: "The board regrets to announce that it has been unable to reach a position where it feels able to continue to trade outside of insolvency protection and in the circumstances therefore intends to file notice to appoint administrators to the company and certain of its subsidiaries with immediate effect."
Nick Edwards, Neville Kahn and Rob Harding of Deloitte will be appointed as administrators. The company said: "The directors understand that it is the intention of the administrators, once appointed, to continue to trade whilst they seek a purchaser for the business."
Analysts expect a buyer for at least part of the group. As the reaction to HMV's demise has shown, the brand, famous for its Nipper the dog trademark, still holds a cachet for many people. HMV had around 35% of the, albeit dwindling, CD market in 2012 and it is thought that around half of its 240 stores could be profitable once the company gets rid of its debt.
Rumours circled on Monday night that the restructuring company Hilco could be interested in buying the group out of administration. Hilco bought HMV Canada from the UK parent in 2011 and has overseen a better-than-expected Christmas at the north American arm, which rang up sales of $65.4m (£40.5m) over the festive period, beating targets.
It was thought that the US vulture fund Apollo Global Management had been considering a bid but is no longer interested in buying the chain. Apollo bought 6% of the company's bank debt two weeks ago.
Neil Saunders, the managing director of the research house Conlumino, said: "The brand certainly has some value, however, while someone could arguably turn a profit in running some of the stores for a period of time they would still be betting against the future. By our own figures, we forecast that by the end of 2015 some 90.4% of music and film sales will be online. The bottom line is that there is no real future for physical retail in the music sector."
The news prompted many to mourn the demise of the 91-year-old chain. Chuka Umunna MP, Labour's shadow business secretary, said: "HMV is a national institution that has been a feature of our high streets for over 90 years so this news is deeply worrying. For the sake of HMV's employees, we hope a way can be found to keep the business going. The demise of HMV – a national institution – would be a sad loss for British retail."
Twitter also saw an outpouring of emotion from fans of the store, with comments such as: "HMV closing is the worst thing that's ever happened to me."
But analysts were philosophical about the chain's collapse. Saunders said: "This outcome was always inevitable. While many failures of recent times have been, at least in part, driven by the economy, HMV's reported demise is a structural failure. In the digital era where 73.4% of music and film are downloaded or bought online, HMV's business model has simply become increasingly irrelevant and unsustainable.
"HMV did not react early enough to the digital trend; it did not give shoppers a reason to keep buying from it. Admittedly, the company has tried to innovate through selling more electricals and gadgets but, unfortunately, these initiatives were never going to be enough to counteract the terminal decline in its core business."
