Blue Apron, a leader in the meal kit delivery service industry, announced its third quarter earnings this past week. Unfortunately, even with the good news of a revenue increase that surpassed analyst expectations, the stock price still took a tumble.
Revenue totaled $210.6 million, a 3 percent increase from the same period last year. Analysts surveyed by Yahoo Finance had been predicting $191.5 million, so shareholders were happily surprised.
However, the company’s losses were 47 cents per share, when Wall Street was bracing for a loss of 42 cents per share. So ultimately, share prices for Blue Apron dropped 9% by end of day Thursday, November 2nd.
According to CNBC, the company is losing customers, but those who choose to stay are spending more and have increased brand loyalty.
The number of customers Blue Apron served in the third quarter was down 6 percent from a year earlier and 9 percent from the second quarter. Bloomberg reported that the average revenue per customer increased to $245 from $227 from this time last year, but was down from $251 last quarter. Cost of good sold rose 13% year to year, which indicated that the company was still growing revenue, but had drop-off from new customers who chose not to continue with the service.
Blue Apron cut costs by decreasing its marketing spend in the third quarter, and will continue to cut marketing costs in the fourth quarter and into 2018. Blue Apron’s CFO said in a call to investors that this will probably lead to a decrease in revenue, according to CNBC.
There’s no doubt that more people are interested in purchasing meal kit services online. Blue Apron faces competition from other services such as Plated and Hello Fresh. (Plated was acquired by grocery chain Albertson’s earlier this year.)
But the big change in the industry happened a few weeks before Blue Apron launched its IPO, when Amazon announced its acquisition of Whole Foods, a popular grocery store chain. Amazon has since been offering its own online meal kit service for a cheaper price. (Many investors see Amazon’s wide distribution network as a competitive advantage as well.) The acquisition news gave investors cold feet, and Blue Apron’s stock has been struggling since despite the company’s revenue growth.
Another concern for investors interested in Blue Apron is the company’s marketing spending, which contributed to huge expenses for the company that weren’t offset by revenue growth. However, Blue Apron is scaling back and has seen some positive results. We’ll see what happens going forward into 2018.
