Not just any legal fight...
Ocado threatens to sue M&S in £160million battle over its deal on deliveries
A ROW between two of Britain’s poshest supermarkets escalated yesterday after Ocado threatened to take court action against Marks & Spencer.
Ocado said it could sue rival upmarket grocer M&S, claiming that it is owed millions of pounds in payments that were linked to performance.
The online supermarket’s boss said he is ‘confident we are owed substantial money’.
The dispute between Ocado and high street stalwart M& S is focused on a £750million agreement over deliveries.
In 2019, the high- end grocers joined forces to create Ocado Retail, a 50-50 joint venture that gave Ocado customers access to M&S food.
Under the terms of the deal, M&S paid £562million upfront five years ago and the last £190million instalment is due in August this year. But payment of the final portion was dependent on certain targets related to financial performance being met.
Ocado failed to meet the goals in 2023 that would have led to the payment automatically being made. According to accounting rules, M&S could hand over just £28million – some £162million less than the maximum payment.
However, Ocado has argued that the criteria should be revised to account for the pandemic.
Though online food shopping boomed during lockdowns, Ocado insisted that it was forced to turn customers away due to the huge surge in demand.
It also argued that it had to shell out for more warehouse space – and that this has eaten into profitability.
The delivery firm threatened a ‘formal litigation process’ to get a bigger portion of the final payment, though it stated that it is willing to negotiate a settlement. Ocado boss Tim Steiner said he believes M&S should pay up in full, explaining: ‘ The key is we believe that we have a very solid case to get full payment.
‘We know M&S may not entirely share that view. We are confident we are owed substantial money.
‘We’ve said for quite a period of time this could be resolved by negotiation – it would be most sensible for us to come to a settlement and that is something we would be very willing to do.
‘We will have those discussions in good faith and are optimistic we will reach a sensible settlement.’
A spokesman for M&S said that it ‘ remains committed to the turnaround strategy for Ocado Retail and our focus is on working with them and Ocado Group to deliver it’.
The official added: ‘ 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.’
These latest developments came as Ocado unveiled a loss of £403million for the year to December 2023, compared to a loss of £500million in the previous year.
However, revenue in its retail division hit almost £2.4billion, up 7 per cent from £2.2billion a year earlier – while its technology solutions business also surged, by 44 per cent, to £421million.
Alongside its grocery business, the company sells technology to other retailers and in addition has a logistics arm.
‘We have a case to get full payment’