August 10, 2017 / 11:27 AM / 3 years ago

Blue Apron shares slump as deeper losses, Amazon loom

(Reuters) - Meal-kit delivery company Blue Apron (APRN.N) lost nearly a fifth of its value on Thursday after saying costs tied to moving to a new distribution center would pile on to losses this year, compounding worries about competition from e-commerce giant

Less than two months after its initial public offering, New York-based Blue Apron also reported a bigger-than-expected quarterly loss. Sharp marketing cuts and stiff competition led to a 9-percent decline in second-quarter customers compared with the first quarter.

Blue Apron spent about $37 on marketing per customer in the most recent quarter, far lower than the $58.50 it spent in the first quarter, according to Reuters calculations.

The five-year-old company, which competes with dozens of startups including Hello Fresh and Plated, serves customers who often switch allegiance or cancel subscriptions altogether once free trials are up. Inc (AMZN.O) registered a trademark for a similar meal-kit service last month, heralding even more competition to come. That move, along with Amazon’s industry-altering deal to buy upscale grocer Whole Foods Market Inc WFM.O has weighed on Blue Apron’s shares since their market debut in June.

Blue Apron said last week that it was ramping down a New Jersey facility and moving jobs to a bigger site opening in the state later this year.

In a post-earnings call on Thursday, the company said it was facing unexpected expenses related to this transition, and forecast a second-half net loss between $121 million and $128 million and revenue ranging from $380 million to $400 million.

Shares in Blue Apron slipped to a record low of $5.03 on Thursday, well below the $10 price in their debut. They were last down 15.4 percent to $5.28.

Snap Inc (SNAP.N), another newly-listed company that has struggled this year, is also due to report results on Thursday.


Blue Apron reported a second-quarter net loss of $31.6 million, compared with net income of $5.5 million a year earlier. On a per-share basis, the company posted a loss of 47 cents, wider than the 30 cents analysts had expected.

Second-quarter operating expenses surged 37 percent compared with the year-earlier period, reflecting increased hiring as well as the cost of operating two distribution centers in New Jersey.

Blue Apron recorded 943,000 active customers in the second quarter, compared with 1.04 million in the first quarter that boosted its IPO. Order numbers also declined in the second quarter, to 4.03 million from 4.27 million in the prior quarter.

It has become commonplace to subscribe to several meal kit providers on a free-trial-basis, only to cancel just before being charged for services.

FILE PHOTO: The Blue Apron logo is pictured ahead of the company's IPO on the New York Stock Exchange in New York, U.S., June 29, 2017. REUTERS/Lucas Jackson/File Photo

“I get my first delivery from Blue Apron Friday. Gonna cancel it so I can try all the others,” tweeted Alice(@alicefrmcroom) on Monday.

“You’re not supposed to buy Blue Apron. You just cancel after the free trial runs out,” another Twitter user wrote.

Blue Apron customer Jon Wages, who uses the meal kits once or twice a month, told Reuters he does not plan to swap away to the competition, but has friends who have complained about the company’s portion sizes. Other customers on Twitter have also complained about missing ingredients and finding recipes too complex.

Reporting by Gayathree Ganesan in Bengaluru and Richa Naidu in Chicago; Editing by Sai Sachin Ravikumar and Nick Zieminski

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