There may be an exit strategy that doesn't end badly for Blue Apron (NYSE:APRN) and its shareholders. Supermarket giant Albertsons revealed on Wednesday afternoon that it's acquiring meal-kit upstart Plated for an undisclosed price, a move that's sparking speculation that Blue Apron might become buyout bait itself.
Blue Apron investors can use a break. The stock has shed nearly half of its value since going public at $10 three months ago. One thing weighing on the provider's fall from grace is that Amazon.com (NASDAQ:AMZN) emerged as a rival by testing its own-meal kit delivery service just around the time of Blue Apron's IPO. Albertsons' purchase of Plated makes even more sense in light of Amazon's purchase of Whole Foods Market this summer. If supermarket chains now need to offer the delivery of ingredients for gourmet meals with step-by-step recipe instructions to compete, it's a lot easier to buy an established player. Whole Foods now has Amazon. Albertsons can work with Plated, offering in-store pickup or home delivery of its meal kits. And Blue Apron becomes a viable acquisition candidate for anyone else.
Aprons are going red
Amazon's arrival is one knock on Blue Apron, but the stock's demise is primarily a self-inflicted wound. The biggest reason investors soured on the summertime debutante was its horrendous second-quarter report. Top-line growth slowed to 18% in its latest quarter, but its guidance points to a 5% to 10% revenue decline during the latter half of this year.
It's getting expensive to attract new customers, and folks aren't sticking around after the novelty of the weekly deliveries wears thin. The average customer placed just four weekly orders in Blue Apron's latest quarter, and that's crummy retention for any kind of business.
Having a supermarket chain as a parent company could help with all facets of Blue Apron's current shortcomings, giving Blue Apron cheaper access to promotional exposure by reaching out to in-store shoppers. Albertsons gets it, and another grocer or discount department-store chain with a similar vision can get up to speed by picking up Blue Apron for less than its IPO price.
The problem with buyout speculation is that it often goes unfulfilled. Blue Apron's lead in this niche makes it a compelling story, but it remains to be seen how much someone is willing to pay or if a bidding war can break out.
It's been a cruel summer for Blue Apron, but things could get interesting in the fall.