Blue Apron, Jet Parting Ways

Newly convinced that direct-to-consumer sales remain its best business opportunity, Blue Apron Holdings will refocus efforts on that core and dial back a multichannel initiative that, among other things, explored sales through Walmart’s Jet.com subsidiary.

Officials of the struggling meal-kit company revealed those plans while reviewing financial results from its fiscal second quarter.

Linda Kozlowski, president and CEO, said Blue Apron had a “great partnership” with Jet, but would be withdrawing its products from the site in coming weeks, in part because the multichannel initiative drew focus from Blue Apron’s core direct business, and brought new challenges in inventory management and shrinkage.

“We have not kept up with the ever-evolving needs and preferences of our customers over the past couple of years and we are behind,” she said, according to a Sentieo transcript. “Some of that is due to the operational challenges the business was confronted with in the back half of 2017, and some of it is because we redirected attention away from innovating in our core offering as we tested alternative distribution channels for the past 1 1/2 years.”

Kozlowski joined Blue Apron in April, inheriting a company that had pursued partnerships under predecessor Brad Dickerson.

She spoke very positively of the potential of the business, saying Blue Apron meal kits could serve about 50 million households in the U.S. “While meal kits offer a broader, richer experience than just convenience, we think the best proxy for a serviceable portion of the market is online grocery purchases,” she said. “Based on the current percentage of the households in America that are buying food online, we believe our serviceable market is approaching $9 billion.”

Jet—Walmart’s urban-focused site that’s had its own issues finding traction—provided Blue Apron with on-demand competencies, Kozlowski said. “Right now, however, we need to focus our efforts on our core business, engaging with our customers week in and week out on our platforms through our direct-to-consumer service. We believe our core business offers a number of unrealized opportunities for growth and is the most attractive place to invest our time and resources right now," she added. 

Kozlowski said her strategic plan revolves around engaging more of the company’s best customers, including empty-nesters and singles; better integrating offerings to its customers through menu choices and customization; and scaling its marketing costs more efficiently.

“As we move forward, the heart and soul of our business will remain in the deep connections that make it easier for our customers to have incredible home cooking experiences even on those nights when they are tried, rushed and stressed,” she said.

Realizing these goals will require the company to once again ramp up its marketing and capital spending after deliberately reeling those costs in to improve its financial picture. Chief Financial Officer Timothy Bensley said these investments, along with the execution of its growth strategy, would lead to “healthy” quarter-over-quarter net revenue and customer growth by the first quarter of 2020 and to year-over-year quarterly net revenue and customer growth in the back half of that year.

For the fiscal second quarter, which ended June 30, Blue Apron’s sales decreased by 34% to $119.2 million. Sales fell mainly due to a deliberate decrease in marketing spend: Marketing expense was $9.7 million in the quarter, or 8.2% of net revenue, vs. $34.6 million, or 19.3% of net revenue, in the second quarter of 2018.

Its net loss of $7.7 million, or 59 cents per share, was down from a $32.8 million loss in last year’s second quarter. Both the net loss and the quarterly sales figure was less than analysts reportedly expected.