Troubled MFI today said talks to offload its furniture stores were at an "advanced stage".

The company said it was still discussing the sale of its 200 outlets, including Middlesbrough, Stockton and Darlington, with private equity firm Merchant Equity Partners.

It came after reports said MFI would agree to sell the retail arm to Merchant Equity for a £1 nominal fee as early as this week.

MFI said: "The board of MFI notes the further press speculation concerning the potential disposal of the retail operations of MFI.

"The company remains in talks with Merchant Equity Partners. There is not yet certainty as to the final terms or timing of any transaction.

"However, discussions are at an advanced stage and a further statement will be made when appropriate."

MFI , which earlier this year shut its Stockton factory with the loss of more than 500 jobs, began the auction of its retail sector in May.

The retail business, which has suffered in the past from supply chain problems, made operating losses of £85.1m in its last financial year - 171% worse than the year before.

MFI wants to focus on its manufacturing unit and more successful Howden Joinery business.

The retail business used to be worth around £1bn but is now likely to change hands for £1 on a debt-free basis with its pensions liabilities absorbed.