Talks for a management buy-out of four of Arcadia's non-core brands are "on-going" a spokesman for the company said today.

The UK's second largest retailer announced that it is planning to dispose of the Warehouse, Principles, Racing Green and Hawkshead brands.

It is also planning to sell its Wade Smith brand as part of a major shake-up following the appointment of new chief executive, Stuart Rose.

Arcadia announced today that it will instead concentrate on six core brands - Burton, Dorothy Perkins, Wallis, Evans, Topshop/Topman and Miss Selfridge.

Acradia revealed that it is in discussions with two of its managing directors, Hilary Riva and Peter Davies, from two of its business units, about the acquisition of Warehouse, Principles, Racing Green and Hawkshead.

The spokesman said: "The talks are on-going and we have nothing more to say at the moment."

The announcement comes as Arcadia released its interim results showing sales from like-for-like stores up 5.5 per cent and the gross margin up 1.7 per cent to 49.2 per cent.

Chief executive, Stuart Rose, who took over last November, said the plans would get the group, second only to Marks & Spencer in terms of market share, back on its feet.

He said: "We have made significant progress in our review of the business and the re-shaping of the Group is now underway. The decision to simplify the business will enable us to focus on our core brands and the proposed sale of the niche brands takes us forward in this aim.

"We will also restore Arcadia to a sound financial footing by reducing debt and operational gearing and improving efficiency and effectiveness. We will seek to provide our customers with better product and improved service."

Arcadia also announced that it had reached an agreement in principle with Littlewoods to acquire shares in the Dial Home Shopping joint venture.

The group's BrandMax plan, unveiled with the interim results last year, appears to be paying dividends . The plan involved devoting more space to womenswear, closing 400 shops and cutting 3,500 jobs.

Interim results released today show that £5m of savings have already been made in central costs. Arcadia's objective to significantly reduce debt by spring 2002 appears to be well on course.

Savings in cash management and benefits are expected to amount to £40m by the year end with an additional £10m by next year.

By Deborah Bowyer