Britain's most famous toy shop, Hamleys, has begun talks with a possible buyer for the business.

The group, best known for its flagship store in London's Regent Street, said it had received an approach and begun "preliminary discussions" but did not name the potential bidder. The takeover talks come after a troubled few years at the group which have slashed profits and sent its shares plunging on the stock market.

Latest financial results from the group, released earlier this month, showed a profit before tax of just £27,000 in the 14 months to March 25, compared with profits of £6.4 million in the previous 12-month financial year.

Chief executive Simon Burke joined the company from Virgin Entertainment Group last year with a brief to turn around the troubled retailer.

Speaking earlier this month Mr Burke said he believed the worst was over and shareholders would receive "much better news from now on".

Hamleys issued its statement after rumours of an approach gave its shares a much-needed lift. The shares have risen steadily since last Wednesday when they stood at a year low of 120p and a further 5.5p rise in early trading today put the stock at 157p.

Since Mr Burke took the helm at Hamleys, the group has closed its House of Toys concessions in other department stores and its outlet at the Eurotunnel terminal which were loss-making. It is keeping its five other satellite stores, which are mainly at airports, and has announced plans to launch its first catalogue in ten years.

The catalogue launch will be accompanied by an expansion of its website.

Hamleys chairman Howard Dyer has announced he will step down later this year and the group has appointed headhunters to find a replacement.