Ocado has dropped its £190.7 million claim against Marks & Spencer (M&S), ending a years-long dispute over their online grocery joint venture. M&S will not make the deferred payment, while both companies continue discussions on warehouse expansion, technology upgrades and the future growth of Ocado Retail.
The decision removes the threat of legal action between two long-term business partners. For customers, there is no immediate impact on Ocado.com deliveries or the availability of M&S Food products, but investors will now watch whether the companies can agree on plans to expand the business.
Why was the £190.7 million disputed?
In 2019, M&S bought a 50% stake in Ocado Retail in a deal worth up to £750 million. The retailer paid about £562 million upfront, while a further £190.7 million depended on confidential financial targets being achieved by the financial year ending November 2023.
Those targets were not met, prompting M&S to value the remaining payment at zero. Ocado argued the targets should have reflected the extraordinary disruption caused by the COVID-19 pandemic, including changing customer demand, warehouse capacity constraints and operational decisions.
Chief executive Tim Steiner previously said Ocado believed it was owed a “substantial sum” and was prepared to pursue legal action. However, the company has now abandoned the claim, and no payment will be made.
Why did Ocado end the dispute?
Neither company has publicly explained why the claim was dropped. However, ending the disagreement allows both businesses to focus on growing Ocado Retail rather than pursuing lengthy litigation.
The decision does not change the original outcome of the agreement. M&S continues to maintain that the performance conditions were not satisfied, while Ocado has chosen not to challenge that position further.
What happens to the M&S-Ocado partnership?
The partnership is continuing. M&S said it remains in positive discussions with Ocado about unlocking the joint venture’s full potential, while Ocado said both companies remain committed to its long-term growth.
Attention has now shifted to future investment. Reports suggest M&S has not approved additional Customer Fulfilment Centres or committed more order volume until revised commercial and technical terms are agreed.
The discussions reportedly include warehouse efficiency, technology upgrades, capacity charges and future investment. Expanding fulfilment centres would allow Ocado Retail to process more grocery orders and improve delivery availability across the UK.
The wider focus on balancing investment with long-term returns reflects challenges facing many UK businesses, including the Mitie and OCS takeover and its impact on shareholders and employees.
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How is Ocado Retail performing?
The dispute has ended during a stronger period for the joint venture. In the latest half-year results, revenue increased 15% and customer orders rose 13%.
- Revenue increased 15%.
- Orders rose 13%.
- Adjusted EBITDA more than doubled from £33 million to £73 million.
- Adjusted pre-tax earnings improved to a £12 million profit from a £17 million loss a year earlier.
Ocado said the business is now profitable across its key performance measures and plans to expand order capacity while maintaining growth. The figures are available in the company’s official half-year results.
What does this mean for customers and investors?
For shoppers, nothing changes immediately. M&S groceries will continue to be available through Ocado.com, and existing deliveries and customer accounts are unaffected.
For investors, the next milestone is whether M&S approves additional warehouse investment and new commercial agreements. Those decisions are expected to have a bigger influence on Ocado Retail’s future than the now-resolved payment dispute.
The emphasis on strengthening grocery operations also mirrors broader changes across the UK retail sector, including Sainsbury’s long-term investment in British fruit and vegetable growers to improve food supply chains.
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