Blue Apron posts bigger loss as distribution spending ramps up

(Reuters) - Meal-kit delivery company Blue Apron APRN.N on Thursday reported a bigger quarterly loss than expected, hurt by heavy spending on a distribution facility in New Jersey as it tries to reel in more customers.

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

The five-year-old New York-based company has shifted focus to investing on improving operations and delivery infrastructure rather than spend the money on advertising to sign up more customers.

Blue Apron said the number of its active customers fell 6 percent in the latest quarter to about 856,000. Some of that decline was due to the summer, when customers often stop food orders.

Shares in Blue Apron, which have fallen more than 50 percent since their June market debut, lost another 8 percent on Thursday morning, hitting their lowest ever level at $4.28.

Blue Apron's increased focus on distribution comes as it faces brutal competition from other startups such as HelloFresh HFGG.DE and Plated, as well as from Inc AMZN.O, which recently launched its own grocery service and also began selling meal kits.

Berlin-based HelloFresh’s shares rose as much as 4 percent on their first day of public trading on Thursday, valuing it at more than double Blue Apron.

Despite its ability to monetize a large customer base and efficient supply chain, the uncertainty of mounting competition casts doubt on Blue Apron’s future, Oppenheimer & Co analyst Rupesh Parikh said.

Blue Apron also said it now expects to lose between $131 million and $138 million in the second half of the year. It had projected losses of between $121 million and $128 million in August.

The higher estimate was due to costs for the 6 percent workforce cut announced last month.

Blue Apron on Thursday also scrapped plans to build a facility in Fairfield, California.

“That is a smart thing. It is intentionally allowing revenue growth to slow in an effort to get expenses - marketing and operating - under better control,” Northcoast Research analyst Chuck Cerankosky said via email.

The company’s spending on marketing fell 31 percent to $34.2 million in the third quarter.

Still, sales rose 3 percent to $210.6 million and topped analysts’ expectations of $191.5 million according to Thomson Reuters I/B/E/S, as Blue Apron earned more revenue per customer.

Average revenue per customer rose to $245 in the third quarter from $227 last year. Orders fell slightly to 3.6 million.

Total operating costs rose 15 percent as Blue Apron ramped up spending on a new distribution facility in Linden, New Jersey and added more premium ingredients and new varieties of food to its kits.

Net loss widened to $87.2 million from $37.4 million last year. On a per-share basis, Blue Apron lost 47 cents, bigger than the 42 cents analysts had expected.

Reporting by Karina Dsouza and Vibhuti Sharma in Bengaluru; Editing by Patrick Graham and Sai Sachin Ravikumar