Tesco eyes an exit from US as it axes Fresh & Easy boss

Supermarket giant loses £850m in five years in America and UK sales slip back again

Tim Mason, the chief executive of Tesco's United States business, has paid the price for losses of £850m over five years at its troubled Fresh & Easy operation, as the group admitted it was "likely" to exit America.

The world's third-biggest grocer said it has launched a strategic review of its 199-store operation in California, Nevada and Arizona, which could see it sold, closed or made into a joint venture, alongside posting a further decline in underlying UK sales in its third quarter.

Philip Clarke, Tesco's chief executive since March 2011, hinted at a bust-up with strategy over Mr Mason, a Tesco veteran of more than 30 years, who is also its group deputy chief executive.

Speaking from Los Angeles yesterday, he said: "I did not think it was appropriate for Tim to lead the review. I wanted a fresh pair of eyes to run the business so it was my decision [for him to leave]."

He added: "It's likely but not certain that our presence in America will come to an end." Credited with creating the Every Little Helps slogan, Mr Mason is leaving after Tesco failed to crack the US market despite investing £1bn in Fresh & Easy since launching to a fanfare in November 2007.

The supermarket giant's expected exit from the US follows other high-profile UK failures in America, including Sainsbury's selling its Shaw's business in 2004 and Marks & Spencer offloading its Brooks Brothers chain in 2001.

Of this country's biggest retailers, only Sir Philip Green's fledgling Topman and Topshop operation in the US appears to be succeeding, with the billionaire poised to sell a stake of 25 per cent in the two chains to the private-equity house Leonard Green & Partners for £250m.

While investors welcomed Mr Clarke calling time on the loss-making US chain and its shares rose by 10.8p to 337.45p, the review of Fresh & Easy is the latest setback for Mr Clarke.

Following years of its underlying sales trailing UK rivals, Tesco unveiled its first profit warning in January in 20 years and three months later a £1bn investment to turn around its domestic business.

Mr Mason, 54, who is also the group's head of marketing, is leaving with immediate effect and is the latest executive to exit since its former boss Sir Terry Leahy handed over to Mr Clarke last year. Its former finance director Andy Higginson, e-commerce chief Laura Wade-Gery, Asian boss David Potts and Richard Brasher, who was its UK chief executive, have all left.

Mr Clarke yesterday said Fresh & Easy's underlying sales growth had slowed to a "trickle" of just 1.8 per cent over the 13 weeks to 24 November, admitting it had been "too hard" to convince US consumers to shop at its 10,000 square feet stores instead of their traditional reliance on big-box shops of over 150,000 sq ft.

Tesco has hired advisers at Greenhill for the strategic review, adding it had received in recent months a "number of approaches from parties interested in acquiring either all or part of Fresh & Easy, or in partnering with us to develop" the business.

Mr Mason, who received total pay of £1.63m last year, will receive a pay-off of £1.7m, including a year's salary, his expatriate allowance and a cash bonus.

In addition, he owns ordinary shares worth more than £6.6m and has accrued a pension pot of over £9m.

Mr Clarke described as "disappointing" at 0.6 per cent fall in Tesco's UK like-for-like sales in the quarter, with him blaming tanking demand for big-ticket items, such as electricals.

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