Ocado forced to cancel some orders amid strong uptake of M&S food

(Sharecast News) - Ocado blamed a surge in demand for their new service for the "very small number" of order cancellations on Tuesday.
In remarks to Reuters, a spokeswoman blamed the brisk uptake of M&S products for the cancellations, adding that the "vast majority" of customers were unaffected.

Hundreds of shoppers were reportedly told less than 12 hours before the scheduled date and time of their deliveries - at least some of which had been ordered weeks before - that they had been cancelled.

The new partnership with M&S followed an 18-year long relationship with Waitrose.

At the weekend, Ocado's chief executive officer, Tim Steiner, had fired a withering broadside at Waitrose.

"They [Waitrose] have done an advert saying 'we'll take it from here' or something. Well, they can't take it from here because they don't have the technology, the infrastructure or the systems." he said.

"To put it bluntly, they don't understand the online market like we do."

Commenting on the launch of the new service, earlier ShoreCap analysts, Clive Black and Darren Shirley, highlighted how the new tie-up between Ocado and M&S had been a year in the making.

For that reason, it had been nearly impossible to anticipate the change in operating conditions due to the pandemic, with Ocado now at full capacity amid sales growth of 40-45%.

When the deal was initially struck, Ocado Retail's sales had been growing at a rate of approximately 10-12%.

Ocado agreed in February 2019 to purchase a 50% stake in Ocado Retail for £750m.

"For M&S, there is the added benefits from entrance to a growth channel where it has been absent, exclusive buying synergies and the joint venture's avoidance of payments to Waitrose," they said.

"Such progress may underscore the second tranche payment to Ocado Group in due course, taking the total to £750m (from £567.5m to date), which would be a demonstrable measure of success."

As of 1229 BST, shares of Marks&Spencer were falling 4.55% to 106.05p while those of Ocado were edging up 0.68% to 2,514.0p