Breaded but mostly battered investors of Blue Apron (NYSE:APRN) thought they were finally getting a break when their stock moved initially higher after posting quarterly results on Thursday morning. It didn't last. Shares of the leading meal-kit provider may have opened higher on Friday, but Blue Apron was hitting new lows less than an hour into the new trading day.
Blue Apron is a mess right now, and posting merely "horrible" results instead of "really horrible" results isn't going to cut it for one of this year's most prolific IPO duds. Let's go over the reasons why the market's spitting Blue Apron back out after its third-quarter financials.
1. Revenue is going the wrong way
Blue Apron's revenue of $210.6 million may be 3% higher than it was a year earlier, but it's still a sizable sequential decline and the latest period of sharply decelerating top-line growth. Things are going to get worse. Its guidance calls for just $169.4 million to $189.4 million in revenue for the current quarter, another sharp sequential slide and results that will be 12% to 22% below the $215.9 million it rang up during the prior year's holiday quarter.
We've known that Blue Apron is having problems with growth since shortly after its IPO. It shocked the market three months ago -- in its brutal second quarter -- when its top-line guidance of $380 million to $400 million suggested an overall decline during the second half of the year. We didn't see that during the third quarter, but the pain is clearly coming now.
Let's fathom the rapid decimation of Blue Apron's revenue growth as 2017 plays out. We went from 42% growth in the first quarter to 18% in the second quarter to a mere 3% in the third quarter. Now we're closing out the year with the dot-com laggard warning of a double-digit percentage decline for the fourth quarter. Ouch.
2. The novelty is wearing thin
There were 856,000 customers during the third quarter, 6% fewer than a year earlier. Revenue still inched higher as average revenue per customer rose to $245 for the quarter, and that's good, but that was a sequential decline.
Customer count, average order volume, and the number of orders per customer all slipped between the second and third quarter this year. With Blue Apron scaling back on its marketing expenditures, it's going to need happier customers as ambassadors. That's just not happening right now.
3. The trend is not Blue Apron's friend
There's a reason why Blue Apron dismissed 6% of its workforce last month, and it's not because this is the calm before the storm. Blue Apron knows that things aren't going well now, and they are likely to be worse in the near future. Competition is also heating up, coming from expected and even unexpected players.
Then we get to the growing popularity of meal-delivery services that are broadening the options of restaurant-quality food that can be enjoyed at home. Blue Apron may be one of the more inexpensive players in the meal-kit business, but it's certainly not cheap -- and the novelty of prepping meals takes time that many consumers and now-impatient investors may not have.