Ocado Sounds Alarm, Indicates Potential Legal Battle with M&S
Ocado has warned of potential legal action against Marks & Spencer (M&S) if the retailer fails to make the final payment for their online food joint venture. The deal, signed nearly five years ago, involved Ocado selling M&S food online. M&S had made an upfront payment of over £560 million, with an additional £190.7 million contingent on meeting specific targets. However, M&S claims that Ocado did not achieve those goals.
Ocado’s co-founder and CEO, Tim Steiner, expressed confidence in the company’s case for receiving the full payment while acknowledging that M&S may not entirely share that view. He emphasized a preference for resolving the issue constructively but stated Ocado’s determination not to walk away from the substantial sum of money owed.
The joint venture, equally owned by Ocado and M&S, was initiated in 2019 and went live in September of the following year, coinciding with the COVID-19 pandemic that increased online grocery shopping.
In Ocado’s recently announced full-year results, a provision of £28 million was made for the payment. However, Steiner criticized the estimated valuation as “ludicrously low.” The company acknowledged that its retail business fell short of performance measures, triggering the automatic payment in the last financial year. Still, it argued that the contractual arrangement with M&S allowed for adjustments based on certain decisions or actions Ocado Retail management took.
Ocado Retail reported sales of £2.4 billion for the year, up from £2.2 billion the previous year, while the overall Ocado group reported a pre-tax loss of £403 million. The retail division’s growth in active customers and average basket value was noted, although customers purchased fewer items per basket amid the current high inflation environment.
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