Ocado said sales dropped in its first quarter as shoppers returned to pre-Covid buying habits, and warned it was difficult to predict what the impact on business would be of rising food prices coupled with the cost of living crisis. The online supermarket, which said it was implementing cost cuts to protect profits, said revenues fell 5.7% to £564.7m year-on-year in the 13 weeks to 27 February as an increase in its number of customers and transactions was offset by a steep fall in the amount being spent online. The average amount spent by a shopper fell 15% year-on-year in the first quarter, to £124, as more customers returned to shopping in physical stores as the UK moved out of pandemic conditions and restrictions. This fall more than offset a 31% increase in active customers to 835,000 and the average number of orders a week rising 11.6% year-on-year to 367,500. Ocado said that, like the rest of the industry, it is being hit by significant rises in costs across the board – the 4.3% rise in food prices in February marks the fastest rate of increase since 2013 – from raw materials, energy and utilities to the dry ice used to keep food frozen and fresh during transport. The company, a joint venture with Marks & Spencer, said that overall the UK grocery market had seen sales fall by 4%, with demand affected by consumers having to cope with steep rises in the cost of living. “The scale of food price inflation over the course of this year, coupled with the overall level of market demand as the cost of living increases, particularly rising energy costs, is difficult to predict,” the company said. “We intend to continue to offer the best possible value to customers while recognising the overall level of pricing in the market.” The company dampened its outlook, saying that while revenue growth for the year should end in “the high teens”, it is likely to be about 10% overall in 2022 due to factors including the war in Ukraine’s impact on inflation, the lower level of market demand, and the “continued return to pre-Covid shopping patterns”. Shares in Ocado closed down 8.2% on Thursday, making it the biggest faller on the FTSE 100.