Reports that online groceries business Ocado (OCDO) is considering an online delivery deal with Marks & Spencer (MKS) have sparked a 5.9% rally to 265.8p.
Last week, M&S said it was considering a ‘soft trial’ of food delivery for this autumn.
M&S currently has a limited ‘food to order’ service for lunches and special occasions.
GOOD FIT
It could be a good fit for Ocado which already has partnerships with Morrisons (MRW) and Waitrose.
Credit Suisse believes that M&S including its products on Ocado’s is the best solution as its range is too limited to offer a standalone service.
Analysts at the investment bank also highlight the potential for Amazon to target M&S as it could provide access to a ‘loyal segment of the market.’
COMPETITION CONCERNS
However, Ocado's contract with Waitrose may affect the deal as it is a direct competitor to M&S.
Credit Suisse notes Waitrose receives a fee on 100% of Ocado’s total sales and limits the business to a minimum of 70% branded private label sales.
If M&S is deemed ‘branded’ it could prove an obstacle to any deal, although a new agreement could potentially be re-negotiated.
