Please ensure Javascript is enabled for purposes of website accessibility

Blue Apron Makes a Brutal First Impression

By Rick Munarriz - Aug 10, 2017 at 3:23PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The do-it-yourself gourmet specialist posts a sharp loss and a sequential revenue decline in its first quarter as a public company. The second half is going to be an even saltier dessert.

Blue Apron (APRN -11.42%) had the perfect opportunity to prove the growing number of naysayers wrong by blowing them away with its first quarterly report as a public company on Thursday...and it just didn't happen. The gourmet meal-kit provider posted brutal financials with sharply decelerating year-over-year revenue growth and another chunky deficit.

Blue Apron stock would go on to hit fresh all-time lows on Thursday, something that may not be saying much for a company that's only been public for less than two months, but investors who got in on the June initial public offering at $10 have now seen their investments shaved nearly in half. Blue Apron's problematic outlook is also not giving the thinning lot of bulls a reason to expect things to get better anytime soon.

A Blue Apron meal-kit unboxing

Image source: Blue Apron.

Appetite for destruction

Revenue climbed 18% against the prior year's results, to hit $238.1 million during the second quarter. Analysts were actually holding out for slightly less, but it's still dreadful growth for a company that grew its top line by 42% in the first quarter and 133% for all of 2016.

What's even more troubling than the rapid deceleration of growth is that the top-line showing was a sequential decline from the $244.8 million the company scored during the first three months of the year. It can't lean on seasonality as a scapegoat, as revenue moved higher between the first and second quarters of 2015 and 2016. Blue Apron blames the sequential dip, in part, on a planned reduction in marketing spend of $26.1 million between the two periods, but that's only going to make investors think that the dot-com dud was inflating sales ahead of its IPO.

The news only gets worse as we work our way down the income statement's ingredients. Cost of goods sold is growing faster than revenue, which may lead fence-straddlers to wonder if scalability will be enough to drive profit growth in the near term. Blue Apron's net loss of $0.47 a share was a deeper deficit than the $0.30 a share that Wall Street pros were targeting.

Your next course won't be any tastier

The rest of the year will be even uglier. Blue Apron is targeting $380 million to $400 million in revenue during the second half of the year, so investors will be bracing for more than just continuing sequential weakness: Blue Apron rang up $421.4 million in net revenue during the latter half of last year, so we're also seeing a year-over-year decline. The company is also eyeing a net loss of $121 million to $128 million for the second half of this year.

There are a few silver linings if you're one of the few believers still out there. Orders per customer and average revenue per order were higher than they've been in each of the three previous quarters. There's also the hope that margins will improve next year once the company's new facility in New Jersey ramps up. However, it's not easy to get excited about a growth stock when the company is telling you not to expect growth through at least the next couple of quarters.

"We are beginning a new chapter as a public company," CEO Matt Salzberg said in Thursday morning's earnings release. Let's hope that this book doesn't have just seven chapters. You know, as in bankruptcy protection.

Rick Munarriz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Blue Apron Stock Quote
Blue Apron
$5.04 (-11.42%) $0.65

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/18/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.