Blue Apron warns on revenue growth, shares tumble

The logo of Blue Apron is shown on a large sign in front of the New York Stock Exchange before the company's IPO in New York, U.S., June 29, 2017. REUTERS/Lucas Jackson

(Reuters) - Blue Apron Holdings Inc APRN.N on Wednesday said it plans to cut marketing spending, sacrificing possible revenue growth to focus on promoting its meal-kit delivery service to its highest-paying, most profitable customers.

Shares of Blue Apron slid more than 10 percent after the move was revealed in an early-morning conference call that followed disappointing third-quarter results released late on Tuesday, along with a layoff announcement. Shares bounced off session lows but remained down around 5 percent at midday.

Moving into 2019, Blue Apron will spend less on acquiring new customers “while targeting customers that exhibit the attributes of our best customers,” Chief Financial Officer Tim Bensley said on the conference call. He added that the company’s focus will be on the top 30 percent of its customers.

Spending cuts will allow Blue April to focus on customers with “proven affinity and retention” and help it turn its first profit on an adjusted EBITDA basis in the first quarter of 2019, Bensley said.

Late on Tuesday, Blue Apron reported a steep third-quarter revenue decline and disclosed plans to lay off about 4 percent of its workforce.

The six-year-old New York-based company's sales have been declining as it faces intense competition from peers including HelloFresh SE HFGG.DE as well as grocers selling ready-to-eat meals. Inc's AMZN.O entry into the grocery and meal kits businesses has added pressure.

Blue Apron said it expects revenue in the current quarter be similar to third-quarter revenue which fell 28.4 percent to $150.6 million, missing the average analyst forecast of $160.3 million, according to Refinitiv data.

Blue Apron shares were down 5.3 percent in midday trading at $1.15. They debuted at $10 in a June 2017 initial public offering.

Reporting by Angela Moon; Editing by Jim Finkle, Chizu Nomiyama and David Gregorio