Ocado ends dispute over M&S joint venture payment amid ongoing expansion discussions

Ocado has reportedly dropped its efforts to secure a £190.7 million payment from Marks & Spencer, bringing an end to a lengthy disagreement linked to their online grocery partnership.

According to reports, M&S will not make any additional payment to Ocado, despite earlier indications from the technology and retail group that it was prepared to pursue legal options to recover the sum.

The dispute stemmed from M&S's 2019 acquisition of a 50% stake in Ocado Retail. The deal, valued at up to £750 million, gave M&S access to Ocado's online grocery platform, allowing customers to purchase its food products through Ocado.com.

As part of the agreement, M&S paid £562 million at completion, while a further £190.7 million was contingent on the venture reaching certain performance milestones by November 2023. Those targets were ultimately missed, leading M&S to conclude that no further payment was due.

Ocado challenged that position, arguing that the exceptional circumstances created by the Covid-19 pandemic had distorted the venture's performance. The company maintained that changes in customer demand, operating capacity and broader market conditions should have been taken into account when assessing the earn-out criteria.

Earlier, Ocado chief executive Tim Steiner had publicly stated that the group believed it was entitled to a significant payment and intended to pursue the matter. However, the companies are now understood to have settled the issue without any financial settlement being made.

The decision comes as both businesses continue separate negotiations over the future development of their partnership.

Reports suggest M&S is yet to approve plans for additional customer fulfilment centres and has held back from committing greater volumes to Ocado's existing warehouse network while discussions continue over commercial and operational terms.

The retailer is believed to be seeking changes aimed at improving efficiency across the operation, including technology enhancements and revised pricing arrangements relating to warehouse capacity.

An M&S spokesperson described the relationship with Ocado as positive, saying both parties remain engaged in constructive discussions focused on maximising the benefits of the partnership.

Ocado echoed that sentiment, stating that both companies remain committed to the continued growth and long-term success of Ocado Retail.

The joint venture has recently delivered improved financial results. During the first half of the financial year, revenue increased by 15%, while order volumes rose by 13%.

Profitability also strengthened significantly. Adjusted EBITDA climbed from £33 million to £73 million, and adjusted pre-tax earnings moved into positive territory at £12 million, compared with a £17 million loss recorded a year earlier.

Ocado said the business is now profitable across its core performance measures and intends to further expand order capacity while sustaining its recent momentum.