BEIJING, March 18 (Reuters) - Freshippo, the groceries

arm of e-commerce giant Alibaba Group ( BABA ), has told its

staff that its CEO Hou Yi will step down and retire and be

replaced by the unit's current CFO, Yan Xiaolei, according to an

internal letter seen by Reuters.

"From now on, Hou Yi will step down as CEO of Freshippo and

retire with honor," the letter said. "Yan Xiaolei will serve as

CEO."

Yan is currently CFO of the company. The letter also said

Hou will continue as "chief honorary advisor" of Freshippo for

the future.

Alibaba ( BABA ) did not immediately respond to a request for comment

on Monday.

Hou, 60, joined Alibaba ( BABA ) in 2015 and created Freshippo the

next year as part of the company's "new retail" revolution.

Before that he had worked in the logistics department of JD.com ( JD )

.

The leadership reshuffle at Freshippo is the latest one at

e-commerce giant Alibaba Group ( BABA ), which has seen a number of its

senior leaders depart or move into new roles as the company

undergoes a restructuring and strategy rethink.

Alibaba ( BABA ) had initially told investors that it planned to list

Freshippo before May this year but abruptly halted that plan in

November. Still, Alibaba's ( BABA ) chairman Joe Tsai told an earnings

call last month that its physical retail businesses were not its

core focus and that it made sense to exit them.

Reuters reported in February that Alibaba ( BABA ) was looking to

sell a number of consumer sector assets including Freshippo. A

Freshippo spokesperson denied at the time that Alibaba ( BABA ) planned

to sell the company.

On Sunday, Chinese media outlet Yicai reported that

Freshippo and retailer RT-Mart denied reports that Alibaba ( BABA )

planned to sell Freshippo for 20 billion yuan and RT-Mart for 10

billion yuan to China's state-owned food processing giant Cofco.