In a recent announcement, Marks & Spencer (M&S) has indicated that it anticipates that Ocado Retail, a joint venture formed in 2019 with Ocado Group, will take over three years to reach its full potential. Ocado Retail, a 50/50 partnership between M&S and Ocado Group, focuses on delivering M&S food to customers.
M&S CEO, Stuart Machin, expressed optimism about Ocado Retail’s potential but emphasized that it’s a long-term endeavor. He stated, “We’re very positive about the potential of Ocado (Retail) but to be quite frank … that potential is going to be realized in three plus years, not in the next 12 months or 24.”
During the announcement of M&S’s first-half results, it was revealed that M&S’s share of Ocado Retail’s net loss had risen to £23.4 million, compared to £0.7 million previously. This increase was attributed to costs associated with new and excess capacity.
Machin further explained that Ocado Retail is currently operating at around 75% capacity, leading to higher fixed costs. He noted that both M&S and Ocado Retail CEO, Hannah Gibson, are considering this aspect.
In September, Ocado Retail shared a positive update, reporting that it had returned to volume growth for the first time since the onset of the COVID-19 pandemic. This growth indicates a potential turning point for the joint venture.
The realization that it will take several years for Ocado Retail to reach its full potential underscores the long-term vision and strategy that M&S has adopted for this online supermarket venture.