Sales have slumped at Ocado after the online retail firm said customers are shrinking the size of their orders in response to the rise in the cost of living and the end of Covid curbs.

The company also saw losses balloon to £211 million, from £27.9 million a year earlier, as the group pumped more money into the expansion of its technology operations.

Group revenues fell by 4.4% to £1.26 billion over the six months to May 29, compared with the same period last year.

Growth in its UK and international solutions divisions was more than offset by tumbling sales at Ocado Retail, the group’s joint venture with Marks & Spencer.

Ocado said retail sales fell by 8.3% to £1.12 billion during the half-year.

The decline was driven by “changing customer shopping behaviours as the trend towards shopping smaller baskets with the end of Covid restrictions was further compounded by the growing cost-of-living crisis in the UK”, the company said.

Bosses said they have seen customers switch to cheaper products and change their shopping behaviour in recent months amid price increases.

Chief financial officer Stephen Daintith said the company has seen price inflation of “between 3% and 4%”, although this remains significantly below the 9.8% rise in food and drink prices reported by the Office for National Statistics (ONS) on Wednesday.

“Our customers have not seen the level of inflation reported elsewhere but you can still see changes in buying patterns,” he said.

“When they might have eaten a steak before, some are now buying a burger instead, so that sort of thing is reducing the value of baskets.”

The update comes days after Melanie Smith, chief executive of Ocado Retail, confirmed she will leave the business at the end of August.

The company also hailed progress with logistics over the period, with the group opening six new customer fulfilment centres for retail partners.

Chief executive Tim Steiner said: “The last six months has seen significant progress at Ocado Group and we have put all the building blocks in place to deliver profitable growth and strong cash flows.”

Shares were 2.2% lower in early trading on Thursday.