Five years after its widely publicized U.S. debut, British supermarket operator Tesco is embarking on a strategic review of its beleaguered Fresh & Easy chain that has struggled to turn a profit from the outset.

In tandem with confirming the strategic review that seeks to sell or close its 200 U.S. stores in California and Nevada, the U.K.’s biggest retailer also bid farewell to the CEO of its U.S. business, Tim Mason, former chief marketing officer and 30-year company veteran.

“It is now clear that Fresh & Easy will not deliver acceptable shareholder returns on an appropriate timeframe in its current form,” said Philip Clarke, Tesco’s chief executive, who noted the mandate before him to deliver long-term shareholder value since his appointment as CEO last year.

“Following a year in which my priority for Fresh & Easy was to improve its performance," Clarke continued, "I have now made a fully-informed assessment of its longer term potential.”

Although the business maintains “many positives,” he added, “the journey to scale and acceptable returns will take too long relative to other opportunities.”

Clarke expressed his “thanks and good wishes” for the outgoing Mason, who “has played an important part in our success over a 30 year career with the company.”

The strategic review follows Tesco’s October announcement that any further capital investments in Fresh & Easy would be “tightly constrained whilst the business focused on reducing costs and improving the profitability of its existing stores,” Tesco said.

Tesco employs roughly 5,000 people in its approximately 200 Fresh & Easy stores, which have steadily accumulated mounting losses since first bursting onto the West Coast food retailing scene in 2007, when it projected opening as many as 1,000 stores.

Pat O’Neill, EVP of the United Food and Commercial Workers, blasted Tesco’s decision that “will present uncertainty for thousands of Fresh & Easy workers, whose job security will be called into question in 2013.” O’Neill said “job losses could have been avoided if Tesco had chosen to engage with community stakeholders and its customers to address the many underlying problems and warning signs of the troubled Fresh & Easy model.”

Tesco said it will communicate progress on this process when the company presents its full year results for the current financial year in April 2013.

More information on the move can be found in a "Talking Shop" blog post from Philip Clarke.

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