M&S withholding multi-million pound payment to Ocado over performance failures
By Michele Maatouk
Date: Monday 26 Feb 2024
(Sharecast News) - Ocado slumped on Monday following a report over the weekend that Marks & Spencer is withholding a multimillion-pound payment to the group after their grocery delivery venture missed key performance targets.
The companies joined forces in 2019 to create Ocado Retail, a £750 million tie-up that gave Ocado customers access to M&S food.
Under the terms of the deal, M&S 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.
According to The Times, it is understood that M&S is still in negotiations with Ocado over the payout as performance hurdles have "not been met".
The final payment is binary, meaning that M&S must pay the sum in full or not at all. There is a mechanism in the contract, however, for "adjustments" to be made if both sides agree.
There has been speculation over how much M&S would end up paying Ocado after the online grocer cut the "fair value" of the payout by another £17m to £78m in November, while M&S cut it to zero. Insiders told The Times there was unlikely to be an update on Thursday, when Ocado publishes its full-year results, as talks are still continuing.
At 1105 GMT, Ocado shares were down 5.5% at 499.40p.
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