Tesco, the UK's largest grocery company, said it will likely leave the US after announcing a review of its Fresh and Easy unit in the country and the departure of the unprofitable business's head.

All options are being considered for the US chain and investment bank Greenhill has been hired to assist with the review, Tesco said today as it reported that a sales decline resumed in the UK in the third quarter.

Some analysts have questioned the viability of Fresh and Easy, in which Tesco has invested £1 billion (€1.2 billion) and which hasn't made a profit since it was formed. The unit's loss narrowed by 1.4 per cent to £74 million in the first half of Tesco's financial year.

In April, chief executive officer Philip Clarke pushed back a goal for Fresh and Easy to reach breakeven until fiscal 2013 and vowed to slow store openings and focus on getting each store to profitability.

"It is now clear that Fresh and Easy will not eliver acceptable shareholder returns on an appropriate timeframe in its current form," Tesco said in a statement.

Tim Mason, who has led the unit since its creation in 2007, will leave today after 30 years at Tesco, the company said.

Approaches have already been made for all and part of the Fresh and Easy business in recent months, Tesco said.

The retailer has also been contacted by potential partners interested in eveloping the business, according to the statement.

"Whilst the business has many positives, its journey to scale and acceptable returns will take too long relative to other opportunities," Mr Clarke said in the statement.

Tesco said sales at UK stores open at least a year fell 0.6 per cent, excluding gasoline and value-added tax, in the 13 weeks ended November 24.

Same- store revenue gained 0.1 per cent in the prior quarter, snapping a sequence of six straight declines.

The decline in UK sales is another setback for Mr Clarke, who is investing 1 billion pounds to upgrade the stores, add new products and hire additional staff.

Tesco, which in January cut profit guidance for the first time in 20 years, saw its market share slip to 30.7 per cent in the 12 weeks ended Nov. 25 as discounters Aldi and Lidl and the upscale Waitrose chain gained ground, researcher Kantar Worldpanel said yesterday.

Tesco rose 1.3 per cent to 326.7 pence in London trading yesterday, trimming the decline this year to 19 per cent.

Bloomberg