Yahoo Finance Ocado threatens to sue Marks & Spencer in online grocery deal row
Ocado has threatened to sue Marks & Spencer over a multi-million pound payment for their online grocery partnership amid a growing row over performance.
The pair’s £750m joint venture Ocado Retail has failed to meet targets laid out when M&S agreed to set it up in 2019, Ocado said.
This means Ocado will not automatically receive a final instalment of £191m from M&S. The payment is meant to be binary, meaning either Ocado receives the full payment or nothing.
However, Ocado chief executive Tim Steiner said factors such as the Covid pandemic should be taken into account under the terms of the deal, meaning it should still get paid. Ocado is currently in talks with Marks & Spencer over a settlement, although Mr Steiner said it could pursue legal action if they fail to reach an agreement.
Mr Steiner said: “The key thing is we believe that we have a very solid case to get full payment. We know that M&S may not entirely share that view and we’re happily having a conversation with our partners.
“We would much rather solve this in a nice and constructive way, which is what we’re working towards doing. We are very confident that we are owed a substantial sum of money. And ultimately, I hope we’ll never get there, but we will not walk away from that sum of money.”
Ocado said it had made an assessment that it would receive £28m.
However, Mr Steiner said this was “ludicrously low” and Ocado was expecting to get a higher payment.
A spokesman for M&S said it remains “committed to the turnaround strategy for Ocado Retail and our focus is on working with them and Ocado Group to deliver it”.
They added: “On the specific issue of the contractual contingency payment, our advice is that the financial performance of Ocado Retail means the criteria for the performance payment was not met.”
It comes after months of speculation over whether Ocado would receive the final payment, following criticism from M&S bosses that they had been disappointed by its performance.
In November, M&S chief executive Stuart Machin said Ocado Retail chief Hannah Gibson had asked him to be more positive on the venture.
However, he said: “We have to be very objective... The fact is, when we’ve just had a half-year loss of £23m from Ocado and you see the opportunity, we’re positively dissatisfied.”
Archie Norman, chairman of M&S, has previously told investors he was not happy with the online grocer’s performance.
There have recently been signs of a turnaround recently, with the latest figures on Thursday revealing that profitability at the online grocery business improved through 2023.
It recorded adjusted earnings of £10m for the year to Dec 3, compared to a £4m loss the prior year.
Ocado Group said this was being helped by a push to add more M&S products to the online grocery website to give shoppers more choice. Around 90pc of M&S’s products are now stocked on Ocado, compared to 80pc last November.
The better performance at Ocado Retail provided a boost to the Ocado Group results, with losses narrowing to £403m compared to £501m the year earlier.
