Woolworths could sell its 800 High Street stores for a nominal £1 to a US company that specialises in takeovers of distressed businesses.

Just weeks after arriving as chief executive, Steve Johnson has opened talks with Hilco about a deal that would offload the shops and allow Woolworths to focus on its 2entertain and EUK media and distribution businesses.

A short statement to the stock market today confirmed that tentative talks had been held.Woolies' beleaguered shares fell 1¼p to 2½p on the news.

Hilco would have to take on at least a portion of the company's £385 million debt pile before the board could give it the nod. The staff pension fund and its liabilities is also a key issue. Woolworths has 30,000 staff, 25,000 of which work in the stores. Many would fear job cuts under new owners.

It is not clear what Hilco would do with the shops, but it is thought to believe they can be run as a going concern. Woolworths chief executive Trevor Bish-Jones was ousted after six years to make way for Johnson. Bish-Jones usually claimed a demerger was not possible while the shops' trading performance remained so poor. Johnson could bank millions if he can pull off a deal. Getting the share price back to 20p triggers a £4.8 million bonus.

Woolworths issued a profit warning in July, and analysts say it may barely break even this year. It is being squeezed by price competition from supermarkets and the internet. Despite its troubled position, Hilco could face competition.

Retailers including Iceland boss Malcolm Walker have taken stakes in Woolies in the hope it can be turned around, or value can be extracted in some other way.

Walker made an offer to buy the company recently, which the board rejected as derisory. Baugur and property tycoon Ardeshir Naghshineh have also invested in the shares. The company's bankers, already nervous about getting paid, will take a close interest in the terms of any Hilco deal.

Woolworths does not own the freehold on any of its properties, although they are on long leases. The freehold owners may also want a say in who takes over the company.