Shares in Marks & Spencer fell by eight per cent in late February following news that the FTSE 100 retailer has signed a £750m joint venture with food delivery firm Ocado, which will see M&S entering the home delivery market as early as next year.
Ocado.com
M&S has bought a 50 per cent stake in Ocado UK’s retail business to create a new company called Ocado.com, which will deliver M&S groceries from September 2020, when Ocado’s existing partnership with Waitrose expires.
M&S has funded the deal by selling off £600m of its shares, and by cutting its dividend payments to shareholders by 40 per cent.
Steve Rowe Chief Executive
However, M&S chief executive Steve Rowe said that it was “a fair price” which will ensure the retailer’s long-term growth.
“I have always believed that M&S Food could and should be online,” said Steve Rowe, Marks & Spencer’s chief executive. “Combining the strength of our food offer with leading online and delivery capability is a compelling proposition to drive long-term growth.
“Our investment in a fully aligned joint venture with Ocado accelerates our food strategy as it enables us to take our food online in an immediately profitable, scalable and sustainable way.”
Rowe added that he expects one third of M&S business to come from online sales in the future.
Negative Sentiment
However, despite the promise of long-term rewards, M&S shareholders greeted the news with scepticism.