Marks & Spencer expected to confirm that joint food delivery venture with Ocado is meeting performance targets, triggering a payment of almost £200m
Marks & Spencer is expected to confirm next month that its joint food delivery venture with Ocado is meeting performance targets, triggering a payment of almost £200million to Ocado.
The agreement was struck three years ago and launched in September 2020, despite the pandemic.
The next financial hurdle must be met by November 2023. But bosses at both M&S and Ocado, the joint owners, already believe that the goals will be met.
In the pink: The Ocado Retail joint venture has benefited from lockdowns
It means M&S will be obliged to pay an estimated £190million to Ocado under the terms of the joint-venture agreement.
The payment will not need to be made until the performance deadline has passed at the end of next year. At around that time, M&S will take control of the board of the joint venture.
There has been speculation M&S may also try to raise its existing stake in Ocado Retail above 50 per cent.
One source suggested such a move would be a signal that M&S is ready to accelerate its turnaround strategy under newly appointed co-chief executive Stuart Machin.
However, company sources have dismissed the idea that increasing the stake is a consideration. M&S declined to comment. The joint venture has helped to lift the prospects of the high street stalwart.
The service benefited as locked-down shoppers turned to delivery firms. The operation raked in £28million profit for the group in the six months to October 2 as shoppers continued to buy online.
Last year, three new distribution centres opened in Bristol, Andover, in Hampshire, and Purfleet in Essex. That will add a capacity of around 170,000 orders a week to the Ocado Retail business when the centres are fully operational. It brings the total capacity for Ocado Retail to more than 600,000 orders a week.
Last month, M&S said Machin, who is food managing director and chief operating officer, and joint-chief operating officer Katie Bickerstaffe would become co-chief executives. They will replace current chief Steve Rowe in July.