Ocado Group PLC (LSE:OCDO) shares fell almsot 8% following reports that partner Marks & Spencer was withholding performance-linked payments from the grocery delivery specialist.
M&S is putting a £190.7 million to Ocado "on hold" after the robot-warehouse group missed performance targets last year, with the duo having originally agreed to the payouts through their 2019 tie-up.
The two companies each own 50% of Ocado Retail, the UK business that operates Ocado.com and delivers groceries around the UK, which last month reported a record Christmas.
Thursday’s upcoming result, which will focus more on Ocado Technology Solutions its services arm, come with the shares down 45% fall from last summer's spike, which followed July's half-year results that showed a rare underlying profit.
Analyst James Lockyer at Peel Hunt put out a note today saying Ocado needed to offer an update on its strategy with the shares lower than where they were pre-Covid, suggesting three changes that management needs to impose, with a connection to the M&S JV and Ocado.com.
In their view Ocado’s historical focus on consumer tech and retail after 24 years running ocado.com has "stymied its full growth potential" following its shift to B2B enterprise sales via the deals with overseas supermarket groups like Kroeger, Sobeys and Casino.
Other leaders in the digital commerce space that are ‘B2B-first’ have shown stronger client wins, and share prices, the analyst noted with Ocado’s share price fall compared to Shopify's 40% rise.
"Clearly both were impacted by the reversion to online penetration norms post-Covid, but something is missing," says Lockyer.
"We think three changes are needed: 1) Ocado needs to report against standard B2B KPIs in order for investors to be able to make fair comparisons; 2) it needs to invest more heavily in ‘Client success’ to ensure its clients' investment in Ocado's products can be optimised; and 3) it needs to change its name to remove the perception its value is driven by the success slash failure of only one of its many clients."
The analysts noted that Ocado.com only accounts for around 25% of Ocado Group EBITDA in 2023 consensus forecasts.