What happened
Shares of Blue Apron Holdings (APRN) tumbled 20.7% in August, according to data provided by S&P Global Market Intelligence, after the company reported a net income loss of $31.6 million in the second quarter and saw its customer base fall by 9% sequentially. Additionally, investors continued to be spooked by Amazon.com's (AMZN -1.27%) encroachment into Blue Apron's space.
So what
The subscription food delivery business has gotten off to a rough start as a public company since its IPO back in June. Blue Apron's stock is down nearly 48% since then, and about half of that drop occurred in August.
Image source: Blue Apron.
Investors were expecting losses on net income and earnings per share for the quarter, but the final results were a bit worse than anticipated. The net income loss of $31.6 million created a loss per share of $0.47, which was far worse than the $0.27 loss analysts were expecting. Revenue was up 18% year over year, but Blue Apron is having a problem retaining its customers, and, as noted above, that showed in the Q2 results.
That shouldn't have been a huge surprise after a report surfaced at the end of July from research firm M Science that showed Blue Apron was likely losing customers, and the subscribers it's able to hold onto are spending less money with the company each quarter.
All of this was bad enough, but the company's problems are compounded by the fact that Amazon officially owns Whole Foods now. Amazon was already pursuing its own pre-packaged meal delivery service; its purchase of Whole Foods should help pave the way toward making it a success, if it chooses to ramp up the idea.
Now what
Customer retention is a clear issue for Blue Apron at the moment, and the company is also experiencing increasing costs across several key parts of its business. For example, marketing expenses grew 14.5% in Q2, cost of goods sold was up 28% (excluding depreciation and amortization), and other product, technology, general, and administrative costs jumped 86%, all year over year.
Management said on the Q2 earnings call that there will be "operational pressure" in Q3 as the company transitions its operations to a new facility and experiences higher seasonal expenses -- neither of which will help turn investor sentiment around any time soon.
