Ocado has quietly let Marks & Spencer off the hook in a long-running £190m dispute over their home delivery joint venture.

The FTSE 250 company has dropped its pursuit of a payout from M&S that it believed it was owed as part of the business the two groups run together, City AM understands.

When Ocado Retail was established, the two companies took a 50-50 stake. M&S paid Ocado £560m upfront for providing its delivery services.

A further £190.7m was due, depending on undisclosed targets, but M&S did not make the payment after the venture’s underwhelming performance.

Ocado had previously threatened to sue M&S over the payment, warning that it would use “all available means” to secure the cash and claiming it had a “strong negotiating position” to reach a settlement.

“We are very confident we are owed a substantial sum of money,” chief executive Tim Steiner told shareholders in 2024.

The company is now understood to have dropped its pursuit of the £190m windfall and is instead pointing to plans to “realise the potential” of Ocado Retail. The shift matters because the joint venture remains central to Ocado’s consumer-facing business and a source of scrutiny for investors, even as the company’s broader technology arm continues to face pressure in other markets.

An Ocado spokesperson said: “Ocado Retail continues to be the UK’s fastest-growing grocer, and we were pleased to announce in last week’s half-year results that the business is now profitable across all key measures.

“We expect to build further on this momentum in the coming months by expanding order capacity for customers while maintaining strong growth. Together with our joint venture partners at M&S, we remain focused on realising the significant potential of the Ocado Retail business.”

Ocado founder to step down

M&S has also damped expectations of expanding the partnership. According to The Times, which first reported that Ocado had dropped its pursuit of the payment, the retailer is pushing for technical improvements and better contract terms with Ocado.

A spokesperson for M&S said: “We have a good relationship with Ocado. As you would expect, we are in regular discussion, working together to realise the full potential of our partnership. These discussions are positive.”

Ocado Retail has started to improve after a slow beginning, posting a £12m pre-tax profit in the six months to April, supported by rising customer numbers and higher average spend.

However, the FTSE 250 group faces other challenges, including difficulty attracting new partners for its warehouse technology business after the closure of some of its North American ventures. That leaves the performance of Ocado Retail and the terms of its relationship with M&S more important to Ocado’s near-term narrative than the disputed payment alone.

Steiner, who co-founded the company in 2000, said earlier this month that he will step down as chief executive and move into a founder role in about 18 months, following a boardroom dispute with chairman Adam Warby.

Shares in Ocado rose 2.3 per cent to 189p on Tuesday.