A DEPARTMENT store in the heart of a town has been saved from closure, it emerged last night.

The Co-operative Group said it had sold its Bishop Auckland site, in County Durham, to the Anglia Regional Co-operative Society, which is already a major department store operator. All 32 jobs will also be saved.

The future of three other stores - in Chester-le-Street, Newcastle and Gateshead - which employ about 120 people, remains unclear.

The Co-op announced in October that it planned to close ten of its stores and hoped to sell the remaining 26 by February next year. Any that are not sold will be shut down.

The firm said yesterday it had agreed in principle to sell nine stores to Anglia for an undisclosed sum.

Between them, the sites employ nearly 270 people, all of whom will transfer to Anglia as part of the deal, which is planned for completion in March.

Yesterday, traders and politicians in Bishop Auckland welcomed the news.

MP Helen Goodman said: "The Co-op site, in Newgate Street, is at the heart of the retail centre and the fact all the jobs have been saved and transferred is excellent news."

Paul Wilson, chairman of the Bishop Auckland Traders Association, said he had feared that, if the store closed, Bishop Auckland was at risk of becoming a ghost town.

"We have a lot more development happening in the town and the fact the Co-op has been saved is fantastic," he said.

Anglia's chief executive, Neil Double, said that all nine Co-op sites would fit well with its existing department store network, which operates under the name Westgate.

Paul Hewitt, the co-op's deputy chief executive, said: "We are pleased to have agreed the basis of a deal with Anglia and both parties will be working to conclude it as quickly as possible."

The Co-op has 1,700 food stores, as well as travel agencies, 300 pharmacies and 500 branches that arrange thousands of funerals every year.

The group said in October that its department store division lost more than £4m in 2004 and had a history of poor performance.