HARRODS, the London department store, is understood to be considering a flotation which would value the company at £2 billion sterling.

The flotation is being looked at as one option in its expansion plans.

According to newspaper reports, that is chairman Mr Mohamed al Fayed's favoured option. They claim he and investment bankers are working on a prospectus to sell about a fifth of the equity in a dual listing on the New York and London stock exchanges.

But a spokesman for Harrods said: "At the end of another successful year of trading, Harrods is examining a number of options in the next stage of its planned expansion.

"As yet, no firm decisions have been taken and there is no timetable.

"In the event of a public offering being selected from the number of options being considered, an appropriate statement would be made."

Harrods' 1995/96 results are due soon and analysts believe they will show profits increased from £56 million to more than £70 million on sales of about £500 million.

The Fayed brothers took control of Harrods in 1985 through their £573 million takeover of the House of Fraser department store group, which was itself later floated on the stock market.

The recent successful flotation of Harvey Nichols, the upmarket Knightsbridge store, has demonstrated to Harrods that investor demand for luxury goods businesses is strong.