M&S decided two years ago to dispose of the 27-store American chain as part of a strategy to refocus on its core domestic market. But chief executive Roger Holmes announced today that discussions to sell Kings, which generated turnover of £290.1 million ($467.5 million) in the year to 31 March, were off.

He said: "In the current US climate it has not been possible for interested parties to raise sufficient funds to purchase Kings at what we perceive to be a fair price." Holmes added that Kings remained outside of the blue-chip company's core strategy, but that it would still look to maximise its value by working with the division's senior managers to improve its financial performance.

When Kings was put up for sale in 2001, analysts predicted that the operation could fetch in the region of £185 million ($298 million) and could go some way towards improving the fortunes of the ailing retailer which had become one of the biggest brands in UK retailing.

The strategy, which at the time was expected to cost more than 4,000 jobs, also included the closure of 38 stores on the Continent and the shutting of a mail order catalogue business in the UK. But since then fortunes have dramatically improved at M&S and the company has no need for a fire-sale of Kings.

The Kings food chain, which focuses on the upper end of the market, was founded in 1936 by the Bildner family and subsequently acquired by M&S in 1988. The business is based in Parsippanny, New Jersey and operates stores ranging in size from 6,000 to 27,000 square feet.

But Kings has struggled in the difficult retail climate, with turnover down from the £328.7 million ($529.5 million) seen in 2002 and operating profits at £7.9 million ($12.7 million) compared with the £12.6 millions ($20.3 million) seen a year earlier.