UPDATE 1-PPR to unveil Fnac exit plans - source

* Plan could see spin-off or initial public offering

* Money-losing business long seen as tough sale

* PPR shares rise nearly 2 pct

(Adds background, analyst and trader comments)

PARIS, Oct 8 (Reuters) - PPR will announce its plans for a possible stock market listing or spin-off of book, electronics and CD retailer Fnac following a presentation to staff on Tuesday, a source familiar with the matter said on Monday.

The plan will then be put to shareholders for approval at next year's annual general meeting, the source said.

"PPR's board is due to meet tomorrow on the plan to split from Fnac before it's presented to the brand's workers," the source told Reuters. "The exit plan is not completely decided, it could consist of a spin-off or stock market listing."

PPR is exiting its retail businesses to focus on its luxury brands, including Gucci and Yves Saint Laurent, and sports lifestyle brands Puma and Volcom. It sold furniture retailer Conforama last year and said last week it would update investors on plans to sell its Redcats mail order unit before Oct. 25.

Fnac, which has suffered as consumers turn to the Internet, saw recurring operating income drop 47 percent last year. Fnac swung to a loss of 7.5 million euros in the first half of this year while luxury profit rose 30 percent.

"Fnac has a good chance of attracting private equity or industrial bids," a Paris-based trader said, citing a price of around 550 million euros ($718 million). "On the other hand, an IPO of Fnac would not be an easy thing to organize in the current market mood."

The disposal of PPR's retail assets could boost the stock, depending on the price, as well as paving the way for luxury acquisitions, the trader added.

Still, PPR has struggled to get bids for Redcats at the valuation it wanted and bankers have long viewed Fnac as an even tougher sale.

"If you look at it in terms of electronics, they're definitely in trouble," said one Paris-based investment banker. "Bookshops aren't in the best shape either."

Shares in PPR were up 1.7 percent higher at 123.75 euros by 0733 GMT, the only gainers on a 1.4 percent weaker French CAC 40 index for a rise of close to 12 percent this year.

Analysts at CM-CIC Securities put a value of 775 million euros on Fnac, or 6.1 euros a share, saying a spin-off was a suitable option given "the difficulty of selling this asset".

The analysts raised there price target for the stock to 150 euros from 136 euros, adding it to their list of recommended stocks with a "buy" rating.

PPR declined to comment. ($1 = 0.7657 euros)

(Reporting by Pascale Denis, Additional reporting by Christian Plumb and Blaise Robinson; Writing by James Regan; Editing by Christian Plumb)

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Keywords: PPR FNAC/