Source: Ocado

Ocado has threatened to sue M&S over the final payment in the pair’s £750m joint venture.

The joint venture with Ocado Retail has not met undisclosed performance targets, meaning M&S will not automatically pay the full final instalment of £191m, having paid £562m at the outset in 2019.

Ocado failed to meet agreed performance criteria in 2023 that would have led to automatic payment of the instalment. The Ocado Group estimated in its full-year results on Thursday it would receive £28m under accounting rules.

However, it said this was “significantly lower than the amount that Ocado believes it will receive in the future, either via a formal litigation process or settlement”.

It said the contractual agreement with M&S expressly provided for the target to be adjusted, and “significant decisions and actions” taken by Ocado Retail management during the Covid pandemic met the requirement for adjustment.

Ocado CEO Tim Steiner told reporters: “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.”

M&S is also confident of its position and intends to defend should the matter come to litigation.

An M&S spokesman said: “M&S remains committed to the turnaround strategy for Ocado Retail and our focus is on working with them and Ocado Group to deliver it.

“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 came as Ocado Group posted a £394m annual loss last year, despite a 9.9% sales rise, as the cost of technology and rolling out its operations internationally continued to weigh on its bottom line.

Ocado Retail revenue grew by 7%, as active users grew by 5.9% to 998,000, average orders per week climbed 4% to 393,000, and average basket value increased by 2.7%.

M&S CEO Stuart Machin has expressed frustration with Ocado Retail’s performance. He said in November he was “positively dissatisfied” with it after M&S racked up a £23m loss from its part in the joint venture during its first half.

Read more: Has Ocado done enough to impress investors and M&S?

“Hannah [Gibson, Ocado Retail CEO], always says to me, it would be great if you could talk positively about Ocado,” said Machin.

“The fact is, when we’ve just had a half-year loss of £23m [from Ocado Retail] and you see the opportunity, it’s positively dissatisfied.”

He said he was “very positive about the potential of Ocado” but warned “to be quite frank with you, I think that potential is going to be realised in three-plus years, not in the next 12 months or 24”.