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Blue Apron Holdings Reports Q2 FY2019


In an August 6th release, Blue Apron Holdings (APRN) announced results for the 2nd quarter ended June 30th 2019.

Despite the understandably optimistic comments by CEO Linda Kozlowski, a review of the past quarter indicates that the company is probably entering a death spiral. How Ms. Kozlowski can state “Our market opportunity is larger we believe that it is growing, leading to significant unrealized opportunities within our core business” is wishful thinking and rejects the reality of the company’s metrics.

Contrasting June 30th 2018 values with June 30th 2019, orders have declined from 3.1 million to 2.1 million. Customers have declined from 717,000 to 449,000 while average order value, orders per customer and average revenues per customer have remained static. Sales were down 33.6 percent compared to the 2nd quarter of 2018. The company operates with a gross margin of 60 percent admittedly reduced from 64 percent but the P&L documents disproportionate product- technology and general and administrative expenses equivalent to 29.5 percent of revenue. For the most recent quarter, net loss was $7.75 million. Admittedly this was less bad than the $32.84 million loss incurred during the 2nd quarter of 2018. The major reason for the apparent improvement was the fact that the company pared marketing costs from $34.6 million to $9.7 million.

In either an attempt to bolster investor confidence or as an expression of self-delusion, the CEO neglected to comment on the scale of competition. WW International (previously Weight Watchers) is selling meal kits on the Walmart website. The Kroger Company and Albertson’s have launched rival meal kits and Amazon and Whole Foods have their own brands. It is generally accepted that the market is saturated and that there is little or no brand loyalty among consumers.

Blue Apron is projecting a loss of $55 million to $62 million for the second half of Fiscal 2019 attributed to two new initiatives to increase customer growth and enhance revenue. The company has been impacted by an exodus of executives and in November 2018, laid off five percent of its workforce.

The Blue Apron 52-week range in share price is $6.10 to $35.40 and traded at $8.96 at 14h30 on August 7th. Current market cap is $117.4 million with a forward PE of -2.75. The percentage short of float stands at 28 percent and it is considered significant that only 20.4 percent of the equity is held by institutions. With a negative trailing 12-month operating margin of -13.9 percent and a n profit margin of -15.6 percent and a return on equity of -60.9 percent, this company should be taken over if it has any tangible assets and technology or alternatively should simply be put out of its misery.