Coles's No.2 checks out

Mick McMahon, who was shunted into second-in-command in May when Wesfarmers parachuted "new blood" into the job, yesterday said he was quitting Coles at the end of the year because "I need a challenge and I like to lead".

He would not say where he was going, but ruled out a job at rival retailers and emphasised his 19 years of experience at the oil company Shell.

Mr McMahon was the retail chief operating officer under the previous ownership and stayed on after Wesfarmers took over in last November because he knew the business inside out. He was acting managing director for six months until Ian McLeod was appointed. He has been with the company since 2005.

His departure is a shock to industry insiders but he is understood to have harboured ambitions to run the company, which were impossible to achieve under Wesfarmers.

Wesfarmers could never have appointed a former Coles executive to run the business, having told investors the business needed new management.

Mr McMahon was well-liked and respected and was upfront about admitting where the company had got things wrong - such as with its failed rebranding of the Bi-Lo discount supermarkets into Coles supermarkets.

His decision to leave comes just weeks after Tony Leon, the former general manager of the Woolworths liquor chain Dan Murphy's, joined as Coles's liquor boss with a $2 million sign-on bonus that exceeded any bonuses paid to Mr McMahon.