Ocado records a record loss in six months when the boss admits his disappointment with the partnership with Marks & Spencer
Ocado’s boss admitted he was “disappointed” with the performance of the partnership with Marks & Spencer as the company crashed to its biggest half-year loss ever.
After the online supermarket reported a loss of £289m for the six months to May 28, Tim Steiner said the joint venture with M&S was ‘not where we wanted it to be’.
Earlier this month, M&S chairman Archie Norman said he was ‘not happy’ with the situation.
Ocado faces the humiliating prospect of missing out on a payment of nearly £200 million from M&S as targets agreed at the time of the link may not be met.
The companies joined forces in 2019 to form Ocado Retail, a £750 million 50-50 joint venture that gave Ocado customers access to M&S food.
Setback: Ocado boss Tim Steiner (pictured with his partner Patrycja Pyka) said the M&S partnership was ‘not where we wanted it to be’
Under the terms of the deal, M&S Ocado must pay a final installment of £190.7 million by August next year, as long as performance targets are met.
But Ocado has reduced the ‘fair value’ of this payout to £78 million – suggesting it believes there is less than a 50 per cent chance it will get the money.
Tensions between Ocado and M&S are rising over concerns about online grocery stores. The vicissitudes overshadowed a positive reaction to yesterday’s stock market results.
Ocado shares rose 19% despite the record loss in the first half as investors focused instead on underlying numbers that wiped out a series of one-time costs and pointed to a long-awaited improvement in fortunes.
It swung back to an underlying profit of £16.6m in the first half, after a loss of £13.6m in the same period last year.
Shareholders also welcomed the news that Ocado Retail was back in the black in the second quarter.
Not everyone was convinced, however, with total losses totaling nearly £1.8 billion since Ocado’s launch in 2000.
“The numbers remain grim — time is running out for this story,” said Clive Black, a retail analyst at Shore Capital.
Steiner admitted, “When we look back at where we were in 2019 and where we hoped the company would trade now, it’s obviously disappointing.”
The online supermarket has been hit by changing shopping behavior after Covid and baskets being pruned by higher costs.
Steiner said the UK was “definitely past the worst” of food price inflation, adding: “I think ideally we need to see interest rates stabilize and fall before we can start to see inflation actually start to come down again.”
Ocado has increased its prices by an average of 8.4 per cent per item to £2.72, compared to £2.51 in the first half of last year.
The company consists of three parts: the collaboration between Ocado Retail and M&S; UK Logistics, which manages robotic warehouses and deliveries in the UK; and Technology Solutions, which provides technology to partners abroad.
Experts have recommended a sale or spin-off of Technology Solutions, the robotics division that is successfully expanding internationally.
Steiner also dismissed last month’s rumors that Amazon was eyeing a takeover.
“Speculation is speculation, I have nothing to say,” he said.