COVID Throws a Lifeline to Blue Apron

Consumer impacts of the COVID-19 lockdown sparked a sudden return to revenue growth, profits and cash for Blue Apron, the scuffling meal-kit company that only months ago sounded a cry for financial help.

The company is not out of the woods yet, but for the 12-week fiscal second quarter ending June 30, the New York-based online retailer said sales increased by 10% to $131 million behind 20,000 new customers and increases in average revenue per customer (up 25% to $331); orders per customer (a 17% increase to 5.4 orders); and average order values (up 5% to $61). Those metrics were the best the company has realized since its heady growth period in 2015, helping the company swing to quarterly net income of $1.1 million, vs. a $7.7 million loss in the same period last year. Adjusted EBITDA increased 148% year over year to $11.1 million.

CEO Linda Findley Kozlowski in a statement said the increase in demand resulting from the onset of the pandemic—which accompanied shelter-in-place orders over much of the period, triggering an explosion in meals consumed at home—helped to accelerate impacts of an ongoing strategic reset at the company built around better engaging customers; offering more flexibility in product assortment and services; and scaling its marketing with more precision.

The company in February had acknowledged it may not have the financial power to see the turnaround through and was evaluating a range of strategic options, including business combinations, recapitalizations, deals to go private or a sale. That process is continuing, the company said, although $14.4 million in free cash flow generated during the quarter is giving it some breathing room. It estimates that a “portion” of the demand increase it has experienced over the past few months can be sustained through the end of this year and potentially beyond, noting “this will likely occur at varying levels as the impact of the pandemic changes over time.”

“Our progress with our strategic growth plan, together with the increase in demand we saw from the COVID-19 pandemic, resulted in solid and continued year-over-year growth in key customer metrics, including average revenue per customer, which was above $300 for the first time in more than five years,” Kozlowski said in a statement. “As a result, we generated strong adjusted EBITDA and free cash flow in the second quarter, which adds financial flexibility for Blue Apron to continue executing our strategic growth plan.”

Blue Apron stock, which was trading as low as $2.10 a share in February, was up by nearly 114% year to date at market opening Wednesday.

Blue Apron said it expects revenues in the current third quarter to climb by 13%, but assuming historical seasonal demand trends, is forecasting a net loss of no more than $18 million and an EDITDA loss of $8 million.

That projection also assumes the company can skirt disruptions in the business due to the COVID outbreak. During the second quarter, Blue Apron said it experienced hiring and attendance challenges similar to other companies. As a result, the company has, from time to time, closed some weekly offering cycles early and delayed the launch of certain new products.

In order to meet the increased demand, the company took action to increase capacity at its fulfillment centers, including hiring new employees, increasing wages for front-line workers and temporarily reducing menu options, which limits the need to change production lines and allows for more time to pack meal kits.