Blue Apron Seeks a Lifeline

Blue Apron, which pioneered online meal-kit delivery in the U.S. but has long struggled to make a viable business of it, is evaluating a range of strategic alternatives, including business combinations, recapitalizations, deals to go private or a sale.

Officials of the New York-based retailer acknowledged that an ongoing turnaround effort—which has begun to reverse negative trends—would require additional investment to be successful. In addition, the company said it would be closing a production facility in Arlington, Texas, in a cost-saving move.

“These efforts reflect the commitment of the board, management and myself to doing what’s in the best interest of the business, Blue Apron shareholders and other stakeholders,” Linda Kozlowski, president and CEO of Blue Apron Holdings, said in a conference call this week, according to a Sentieo transcript.

Blue Apron rode consumer interest in the convenience and online shopping trends to soaring valuations and a public stock offering in 2017, but high customer churn and acquisition costs, along with expenses in rapid expansion, has prevented it from ever turning a profit.

Blue Apron stock, which at launch sold more than $100 per share, was up more than 11% to $4.37 early Feb. 19.

Kozlowski, who was appointed CEO last April, announced in August a new strategic plan built around better engaging its best customers; offering more flexibility in product assortment and services; and more precisely scaling its marketing. Kozlowski said this week that plan was beginning to show up in improved financials and that realizing the full benefits of the plan would require additional investment and time.

The board has not set a timetable for the review process, although Chief Financial Officer Timothy Bensley said the company had a plan to “manage” the business if it were unable to deliver the intended results of its strategic plan, “which would include prudent expense management and additional cost optimization initiatives.”

The announcement came as the company reviewed preliminary fourth-quarter and fiscal year financial results that illustrated that losses—as well as sales—had dwindled.

For the quarter ending Dec. 31, net revenue was $94.3 million compared to $140.7 million in the fourth quarter of the prior year—a 33% decrease—reflecting the company’s efforts to engage with their best shoppers and pare down wide-ranging acquisition efforts. While total customers were down by 37% to 351,000, orders per customer in the period were up slightly, and revenue per customer was up by 6.7% to $269 over the three-month period.

Those figures were encouraging to Kozlowski who, in response to a question from an analyst, still referred to meal kits as “a very new industry,” with opportunity for those that can market it. “As one of the larger players in the space, we do still see significant opportunity for upside, particularly tracking against growth in online grocery spend and other areas," she said. 

“We also do still believe that our brand remains the strongest in the U.S. industry,” she added. “And we're seeing increased pressure from the competitive landscape, particularly on a dollar-for-dollar marketing spend standpoint, which is part of the reason that is our focus, when we think about strategic alternatives is how we further invest with a focus on marketing going forward. We are seeing strong results from the product initiatives that we're actually putting out there. And so we’re confident that there is opportunity ahead with the right level of marketing investment.”