Thousands of people may go empty-handed after photography studio Olan Mills collapsed, raising fears that families will not get refunds for pre-paid photo shoots they received as Christmas presents.

The firm ceased trading on Boxing Day and will go into administration on Friday, putting hundreds of jobs at risk. It has joined a growing list of retailers that have become casualties of the worsening economic downturn.

Olan Mills, which specialised in baby and family portraits, has closed all its 34 studios across England and Wales, 25 of which were based in Mothercare stores. It said an administrator would be appointed shortly to handle the affairs of the business. The Olan Mills studios within Mothercare employed 70 people.

It is the second time Olan Mills has collapsed during the Christmas period – two years ago it was rescued by a management buyout. Several Facebook groups have sprung up to give staff a say on the company's closure. One staff member lamented: "What a nice Christmas gift. I walk into work at 10.30 Boxing Day to find out again Olan Mills has gone into administration. Thanks a lot, no info, no contact ... What do I do next? RIP Olan Mills!"

Another, who said she worked for Olan when it reopened in April last year, said she "saw it going down and got out quickly. Sorry to all you guys that lost your jobs I recall it went down the same time last time. I think they knew what was happening."

Reports quoted disgruntled customers as saying the company closed just after getting its Christmas money in. Family portrait gift boxes cost between £50 and £150, while makeover experience gift boxes cost between £100 and £200 and a "Watch me grow" gift box – three photo sessions over a year for babies and toddlers – went for £30.

Olan Mills said it was "endeavouring to fulfil all outstanding orders" and would post photographs already taken direct to customers' homes during January. However, people who have bought a gift box or voucher for studio sessions will be treated as unsecured creditors and have to apply to the administrator for refunds. Customers who paid by credit card were urged to contact their credit card company for a refund, but those who paid by debit card, cash or cheque will have to join the queue of unsecured creditors.

Mothercare said it was "working to ensure that our customers get delivery of photographs they have purchased after a sitting with Olan Mills at our stores" but stressed that Olan Mills was a separate business.

The company, which is based in Irthlingborough, Northamptonshire, was founded by Olan Mills and his wife Mary in 1981 and at one stage operated from around 100 studios. It also runs a studio business in the US. It is believed the US group has not been affected by the closure of the UK business as the two have been run as separate companies, sharing only the name. The US business has more than 125 studios, as well as concessions in retail chains.

A slew of high street names have collapsed into administration, unable to pay their quarterly rent bills after poor sales in the run-up to Christmas. The list ranges from Woolworths to USC, the fashion chain owned by Scottish entrepreneur Sir Tom Hunter.

The economic storm was set to claim more retail casualties, warned Bryan Jackson of PKF, the administrator of USC. "Unfortunately I can't really see it finishing in the short term. I would imagine that the casualties will increase at the turn of the year," he told BBC Radio Scotland. "To have casualties before you even make (the turn of) the year is unusual in the retail sector. So I can only guess it will actually get worse in the new year. And who knows when that will start to turn? I would certainly like to think and hope that by next Christmas things will be looking better rather than worse."

The early start of the winter sales has led to a 12.8% increase in the number of shoppers last week compared with a year ago, following weekly declines before Christmas, according to the latest footfall figures from Experian. But the surge may not last, and heavy discounts will further hurt retailers' profit margins.

"This recent surge in shoppers to the high street may be short-lived as reality kicks in for consumers who will face the first credit card bill of the year, together with job insecurities and recession worries impacting confidence, which may force consumers to tighten their purse strings," said Anita Sharma Manan at Experian.

It also emerged that Debenhams was planning to raise more cash to reduce its debt levels. The Financial Times reported today that the board of the private equity-owned department store chain would discuss its options at the next board meeting in January. The retailer is due to give a trading update on 6 January.