(New sourcing, updates stock price)

Oct 5 (Reuters) - Children's apparel retailer Gymboreehas hired Goldman Sachs to begin a formalauction of the company, which could fetch more than $1 billion,sources familiar with the situation said Tuesday.

The sources declined to be identified by name because theywere not authorized to speak with the media.

Gymboree, which runs retail stores and play centers, hiredGoldman last month after it was approached by at least twofirms -- one of which was Apollo Managementaccording to the New York Post.

Billionaire Leon Black's Apollo Management -- whose recentunsolicited approach to Gymboree helped spur the auction that'snow under way, according to one source -- is expected to beamong the leading bidders, the newspaper said.

Other buyout firms such as Bain Capital, KKR ApaxPartners and Irving Place Capital have also shown interest inthe San Francisco-based retailer, the paper said.

Reports of the company exploring a sale, last week, sentGymboree's stock up 21 percent.

Shares of Gymboree jumped $1.70, or 3.5 percent, to $49.94percent in morning trading on Tuesday.

Gymboree, Apollo Management, Apax Partners, and KKR couldnot immediately be reached for comment by Reuters. GoldmanSachs declined to comment. (Reporting by Mansi Dutta in Bangalore, Jessica Hall inPhiladelphia and Megan Davies in New York; Editing by LouiseHeavens, Dave Zimmerman)