Ocado and Marks & Spencer see shares rise on reports of food delivery partnership
Shares in Marks & Spencer and Ocado were up this morning following reports the firms are in talks over a possible food delivery partnership.
Ocado and Marks & Spencer saw their shares rise five per cent and one per cent respectively in early trading after it emerged the retailer could sign a deal to use Ocado’s warehouses and delivery lorries.
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The discussions, first reported in the Mail on Sunday, could lead to a contract similar to the one between Waitrose and Ocado, which expires next year.
Ocado has recently signed similar deals with Morrisons and US chain Kroger for the use of its automated warehouses to pack and deliver groceries.
Marks & Spencer chief executive Steve Rowe has previously admitted the retailer is playing catch-up with competitors and must improve its online offering.
Rowe has also said delivery is not a suitable model for the chain, as its customers tend to buy a small basket of items to be consumed that day, rather than carrying out a weekly shop. Despite this, the retailer has been trialling a food delivery service in London and Reading.
Marks & Spencer will be looking to a new delivery model to boost trading after it suffered a fall in sales during a tough Christmas period for retailers.
Russ Mould, investment director at AJ Bell, said: “For Marks & Spencer, having a stronger delivery network would give it a new way in which to try and boost earnings.
"There is no guarantee this would be the magic solution to fix its declining profits but it would put the business on a more level pegging with some of its key competitors."
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Retail analyst Nick Bubb said the alleged talks “make some sense” given M&S Food’s lack of online presence.
“But it would be incredibly disruptive and complicated for M&S to just take over an existing Ocado warehouse like Dordon, so we must assume that the talks are at a very early stage,” he added.
Marks & Spencer declined to comment. Ocado has been contacted for comment.