Ocado shares tumble as retail partner Marks poised to hold back funds over poor performance
Shares in online retailer and automation giant Ocado fell by over six per cent this morning following a report over the weekend that its retail partner, Marks and Spencer is holding back a multi-million pound payout due to missed performance targets.
Both Ocado and M&S joined forces five years ago to create the digital grocery brand, in a £750m tie-up.
Before that, Ocado shared the business with Waitrose.
According to a report published in The Times, Marks is still in talks with Ocado over the payout because performance targets have “not been met.”
The British stalwart is due to pay Ocado a final instalment of £190.7m by August. “The payment is contingent on Ocado Retail’s performance against an undisclosed target in the year to November 2023,” the outlet said.
The upcoming payment is binary, meaning M&S must pay in full or not at all. However, it is understood there is some flexibility in the contract if both sides agree to changes.
There have been questions about how much M&S would pay after it cut its fair value of the payout by £17m to £78m last November.
Ocado still has a way to go before it is performing to the standards that Mark and Spencer chief Stuart Machin expects.
Last November, the retail bigwig, responsible for the recovery of the high street darling, said Ocado Retail won’t reach its full potential for another three years.
“We’re very positive about the potential of Ocado (Retail) but to be quite frank … that potential is going to be realised in three-plus years, not in the next 12 months or 24,” the chief told Reuters.
It will be seen as another blow for the tech-focused supermarket which has seen its shares slump in value by around 75 per cent three-quarters from their short-lived lockdown peak in early 2021.
Developments over the weekend come ahead of the firm’s full-year report on Thursday.
City PM has contacted Ocado and M&S for a comment.