Sir Richard Branson's Virgin Group is stumping up millions of pounds to keep High Street music retailer Zavvi in business.

The fallout from the collapse of Woolworths saw its music distribution arm EUK halt supplies to retailers including Zavvi, which has had to go direct to record labels such as EMI to keep the stores stocked.

Virgin is funding Zavvi in batches of £5 million a time so it can get supplies. The money will be repaid as sales are made. Zavvi also owes EUK about £60 million, which Virgin would be on the hook for if the music store went under.

Zavvi today said it was not in immediate difficulty, and the stores are trading well. It claims to have enough cash and stock to cover any liabilities, but has moved to shut down the company website, admitting to supply issues.

This means customers who had ordered DVDs, CDs or computer games for Christmas have seen their orders cancelled. Zavvi said it "would like to apologise for any inconvenience and would like to assure customers that this decision was not taken lightly".

The relationship between Zavvi and Virgin is complex. Virgin sold its 125 music megastores last year to a management team led by Simon Douglas. No figures were disclosed, suggesting Virgin was keen to offload the business.

As part of the deal, Virgin agreed to act as a lender - it has a "contingent liability" in industry jargon. By loaning it money for supplies, Virgin is betting that Zavvi will bring in enough money over Christmas to keep it solvent.

A Virgin spokesman would only say that the company has been "supporting Zavvi over this crucial Christmas period". There are Virgin Mobile counters in Zavvi stores, giving the Branson empire another reason to keep customers flowing into the shops.

A last-ditch rescue bid for Woolworths was being launched today, but analysts fear it has come too late to save the beleaguered chain. Retail grandee Sir Geoff Mulcahy, who ran the business for almost 20 years, claims Woolies can be saved. But with administrators moving quickly to offload various parts of the business, time is fast running out.

Sir Geoff wants to take on 500 of the 813 stores, revive the brand and protect 25,000 jobs. He told The Sun: "There must be a way of trying to save this business. It's late in the day - but there's still a possibility."