Ocado has issued a legal threat against Marks & Spencer regarding a substantial payment related to their online grocery collaboration, as tensions escalate over performance issues.
The duo’s £750 million joint venture, Ocado Retail, has not achieved the goals set during its establishment in 2019, as per Ocado’s statement.
Consequently, Ocado is not guaranteed to get a concluding payment of £191 million from M&S.
Nonetheless, Ocado argues that the agreement with M&S explicitly allows for goal adjustments if the online grocery division took different measures or actions than those anticipated at the time of forming the joint partnership.
Ocado estimates it will receive £28 million, a sum considerably lower than what it anticipates obtaining in the future, either through legal action or a settlement, the company noted.
This development follows prolonged speculation about Ocado’s receipt of the final payment, amidst M&S executives expressing dissatisfaction with its performance.
In November, M&S’s CEO Stuart Machin mentioned that Ocado Retail’s chief, Hannah Gibson, had encouraged him to adopt a more positive stance regarding their joint venture.
Yet, Machin emphasized the need for objectivity, expressing significant dissatisfaction due to Ocado’s recent half-year loss of £23 million and the potential he saw for improvement.
Archie Norman, the chairman of M&S, had also previously conveyed his discontent with the online grocer’s performance to investors.
Despite these challenges, recent developments indicate a positive shift, with the latest data showing an upturn in the online grocery business’s profitability throughout 2023.
The venture reported adjusted earnings of £10 million for the year ending December 3, a notable improvement from a £4 million loss in the previous year.
Ocado Group attributed this progress partly to its efforts to increase the range of M&S products available on its online grocery platform, enhancing customer choice.
Currently, about 90% of M&S’s product range is available on Ocado, up from 80% in the previous November.
This improved performance at Ocado Retail has positively impacted Ocado Group’s overall results, with the company reporting a reduction in losses to £394 million, down from £501 million in the preceding year.
