Burgers not steak - Ocado slips to loss as Britons cut back

By James Davey

LONDON (Reuters) -Customers at Ocado's online supermarket venture with Marks & Spencer are opting for burgers over fillet steaks as even wealthier Britons cut back in a worsening cost of living crisis, Ocado said on Thursday, as it sank to a first-half loss.

Confidence among Britain's consumers fell to a record low last month. Wages are failing to keep pace with inflation that hit a 40-year high of 9.4% in June and is heading for double digits.

Sales at the Ocado Retail venture with Marks & Spencer fell 8% to 1.1 billion pounds ($1.3 billion) over the six months to May 29, with a 13% fall in basket sizes only partially offset by a 3% rise in average selling prices.

"We are not seeing as much inflation on the goods that we sell than we read about in the newspaper and see in Kantar (industry) data," CEO Tim Steiner told reporters.

He said consumers were trading down, for example buying smaller pack sizes and less alcohol, as well as opting for cheaper burgers over expensive steaks.

With basket sizes close to pre-pandemic levels they were unlikely to decline much further, he added.

Shares in Ocado were down 4.4% at 1025 GMT, extending 2022 losses to 56%. Shares in M&S were down 2%.

Ocado did, however, maintain its full-year guidance that was cut in May.

It made a first half loss before interest, tax, depreciation and amortisation (EBITDA) of 14 million pounds ($16.8 million) versus earnings of 61 million pounds in the same period of its 2020-21 year.

Prior to Ocado's update, analysts were on average forecasting full year 2021-22 EBITDA of just 4 million pounds.

On Tuesday, Ocado Retail said its CEO, Melanie Smith, would leave the business at the end of next month.

Steiner said her exit was not due to current trading.

The group forecast full year capital expenditure of 800 million pounds as it rolls out its warehouse technology with grocery partners around the world.

In May, it detailed a path to over 6.3 billion pounds in revenue and over 750 million pounds in EBITDA in up to six years.

($1 = 0.8372 pounds)

(Reporting by James DaveyEditing by Barbara Lewis and Mark Potter)