Ocado racks up a record half-year loss as boss admits disappointment over Marks & Spencer tie-up

Ocado’s boss admitted he was ‘disappointed’ about the performance of the tie-up with Marks & Spencer as the company crashed to its biggest ever half-year loss.

Speaking after the online supermarket reported a £289million loss for the six months to May 28, Tim Steiner said its 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 near-£200million payment from M&S because targets agreed at the time of the tie-up may not be met. 

The companies joined forces in 2019 to create Ocado Retail, a £750million 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 its venture with M&S was ‘not where we wanted it to be’

Under the terms of the deal, M&S is due to pay Ocado a final instalment of £190.7million by August next year, so long as performance targets are met.

But Ocado has cut the ‘fair value’ of this pay out to £78million – suggesting it believes there is a less than 50pc chance it will get the money.

Tensions between Ocado and M&S have been mounting amid concerns over the online grocery business. The troubles overshadowed a positive reaction to yesterday’s stock market results.

Ocado shares jumped 19pc despite the record half-year loss as investors instead focused on underlying figures that stripped out a string of one-off costs and pointed to a long-awaited improvement in fortunes.

It swung back to an underlying profit of £16.6million in the first half, having made losses of £13.6million in the same period last year.

Shareholders also welcomed news that Ocado Retail was back in the black in the second quarter.

Not everyone was convinced, however, with overall losses totalling almost £1.8bn 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: ‘If we look back at where we were in 2019, and what we hoped the business would be trading at right now, obviously that’s disappointing.’

The online supermarket has been hit by changing shopping habits after Covid and baskets being trimmed by higher costs.

Steiner said the UK was ‘definitely over the worst’ of food price inflation, adding: ‘I think we need to see interest rates ideally stabilise and come down before we can start to see that inflation will actually start to go back down.’

Ocado has increased its prices by an average of 8.4 per cent per item to £2.72 from £2.51 in the first half of last year.

It has three parts to its business – the Ocado Retail tie-up with M&S; UK Logistics, which operates robotic warehouses and deliveries in the UK; and Technology Solutions which provides technology to partners overseas.

Experts have recommended a sale or spin-off of Technology Solutions, the robotics division that has enjoyed success with an international expansion.

Steiner also dismissed last month’s rumours that Amazon was eyeing a takeover.

‘Speculation is speculation, I have nothing to say,’ he said.