Blue Apron cuts 10% of staff amid financial pressures

Blue Apron, once a high-flying leader in the subscription meal kit delivery niche, said it will trim its workforce by 10% to cut costs amid rising financial pressures.

The company said that a proposed financing agreement with an affiliate of a shareholder did not unfold as expected, and that it was discussing its options with financial advisors. Because of uncertainty around the financing, Blue Apron had previously withdrawn its proposed revenue growth targets for the full year.

As a result of the layoffs, the company said it would incur about $1.2 million in employee-related expenses in the fourth quarter, primarily in the form of severance payments.

Blue Apron said it plans to further reduce expenses and has identified expense reductions of up to approximately $50 million in 2023. In its third-quarter earnings call with analysts last month, the company said it had begun identifying and instituting several cost-cutting initiatives, including reducing spending on consultants and professional fees, and scaling back its marketing spend.

The company said it is seeking to strengthen its balance sheet to maintain compliance with its $25 million minimum liquidity covenant. Along with the planned cost cuts and other measures that the company is taking to raise cash, Blue Apron said it believes it will have sufficient cash flow to maintain compliance under the liquidity covenant in the first quarter of 2023.

Related:Blue Apron meal kits now sold on Amazon.com

If the company is able to raise funds from the previously planned financing, or from the pledged collateral from that deal, Blue Apron said it believes it will have sufficient cash flow to maintain compliance under the liquidity covenant “into 2024.”

Like many meal kit companies, Blue Apron has evolved its business model over the years as the costs of acquiring and retaining customers for a subscription service have proved formidable.

Founded in 2012, Blue Apron raised considerable finding from private equity before going public in 2017. Although its service was originally available via subscription only, the company began selling its kits in retail stores in 2018, and has continued to expand in that arena, but it has remained unprofitable, other than during a surge in volume at the start of the pandemic.