Ocado Retail sales rise as sharper prices win customers

Q1 revenue up 10.6%

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Active customers up 6.4% to 1.02 million

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Average selling price up 2.2%

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Ocado and M&S wrangling over final payment for JV

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Ocado shares up 7.7%, M&S up 1.9%

LONDON, March 26 (Reuters) - British online supermarket Ocado Retail said a focus on sharper prices helped it win more customers in its first quarter, driving a 10.6% revenue rise.

Shares in Ocado Group and Marks & Spencer were up 7.7% and 1.9% respectively on Tuesday after the joint venture between them also maintained its guidance for the year.

"Customers are responding well to our ongoing focus on choice, service and value and in quarter one we stepped up our efforts again," CEO Hannah Gibson told reporters, noting UK consumers "are feeling a bit more confident".

Ocado Retail said average selling price growth in the quarter to March 3 was 2.2% - below grocery market inflation, which was 4.5% in researcher Kantar's March report, which also revealed the JV to be Britain's fastest growing grocer.

It lowered prices on 1,700 items and added more M&S products, which represented about 28% of the quarter's revenue.

Retail revenue was 645.3 million pounds ($816.4 million) and active customers rose 6.4% to 1.02 million.

Volume, or total items sold, grew 8.1% to 242.1 million, with average orders per week up 8.4% to 414,000 and average basket value up 2.1% to 125.47 pounds.

Ocado Retail stuck with its guidance for full-year 2023-24 revenue growth of "mid-high single digits percent" and an underlying EBITDA margin of about 2.5%.

Ocado Group and M&S are wrangling over a final payment for M&S's share of the 50:50 joint venture which was formed in 2019.

M&S says the business has not met the performance criteria for the payment. Ocado Group says the target should be adjusted and has threatened legal action.

Gibson said talks were ongoing on the issue.

Last month, Ocado Group reported a lower annual loss and said it would not make a pretax profit for five or six years.

Online's share of Britain's total grocery market was about 7% before the onset of COVID-19 in 2020. It peaked at about 15% during the pandemic but has since fallen to about 12%, industry data shows. ($1 = 0.7904 pounds) (Reporting by James Davey; Editing by Paul Sandle, Jason Neely and Alexander Smith)