However, fears that bondholders might pull the plug on the entire group eased after it announced it had reached a long- awaited refinancing deal with its bankers.
The main casualty of the cuts will be the down-market Ratners chain, where sales have slumped since Gerald Ratner, the former chairman, famously disparaged some of its products.
The group's H Samuel and Ernest Jones chains - which sell more expensive jewellery - will also close some shops.
The group plans to shut down 112 of the 247 Ratners shops over the next three years and intends to take the other two chains more upmarket, reducing the emphasis on price and narrowing ranges. Up to 1,000 UK jobs will be shed.
Mr Ratner, now chief executive, said the era of pile it high and sell it cheap was over.
'In the Eighties you had a lot of young girls with a lot of disposable income. The poll tax put paid to that.'
At a conference in April 1991 Mr Ratner, then the chairman and chief executive, brought down a deluge of bad publicity on Ratners when he jokingly described one of its products, a cut-glass sherry decanter set, as 'total crap'.
Jim McAdam, the new chairman who was recruited in January to turn round the struggling group, said that the adverse publicity after Mr Ratner's gaffe had contributed to the poor performance of the Ratners shops.
But the main problem was the severe effect of the recession on consumer spending.
The shopworkers' union, Usdaw, said the plans were another blow for retail jobs. Garfield Davies, the union's general secretary, said: 'It's time the Government took action to stimulate the economy because the recession is biting harder and harder in the high street.'
The losses at Ratners for the year to 1 February compare with a profit in the previous year of pounds 112m.
Sales collapsed by 15 per cent in the crucial six weeks before Christmas, when Ratners usually makes most of its profits. There was no final dividend.
While full-year UK sales fell by 13 per cent, sales in the Ratners chain slumped by 21 per cent. Mr McAdam said: 'Despite these disappointing results, I consider the group's businesses to be fundamentally sound.'
However, sales had continued to fall in the new financial year. The figures showed pounds 98m of one- off losses, including a pounds 10m loss made by a Ratners staff trust that aggressively purchased unwanted Ratners shares last year.
Ratners' banks, led by Barclays, have agreed to extend pounds 460m of banking facilities for another 10 months. The deal allows for the repayment of pounds 58m of convertible preference shares and accrued interest in November, subject to stringent conditions.
In the United States about 1,500 jobs are to be axed through central rationalisation and 150 store closures. The annual cost savings on both sides of the Atlantic could reach pounds 50m, Mr McAdam said.