Kids' apparel retailer The Children's Place Retail Stores Inc is in talks with Walt Disney Co to buy its ailing Disney Store chain in North America.

Disney Store, which has 335 outlets across the United States and Canada, sells apparel and toys based on Walt Disney's famous cartoon characters.

It is estimated to be losing $50 million a year for the entertainment giant.

In a statement, New Jersey-based Children's Place said it was discussing a possible acquisition of the chain under a long-term licence, though no formal deal had been reached.

However, Disney spokesman Gary Foster declined to say if there were other bidders for the chain or when a deal might be struck.

"This would be a very complicated transaction because of licensing agreements and brand issues," Foster said.

"We are very patient and will make sure it is the right deal for both parties."

Disney is in the process of shifting its consumer goods strategy from running its own chain to designing and licensing products to major retailers like Wal-Mart Stores Inc.