Please ensure Javascript is enabled for purposes of website accessibility

Why Blue Apron Holdings Inc's Shares Plunged 37% in November

By Travis Hoium - Dec 7, 2017 at 11:25AM

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

Delivery service Blue Apron Holdings had some rotten news about its operations last month and that sent shares tumbling.

What happened 

Shares of Blue Apron Holdings Inc (APRN -2.43%) plunged 37.3% in November, according to data provided by S&P Global Market Intelligence, after the company revealed problems with a new fulfillment center. The stock is down over 60% since its IPO this summer and it doesn't look like a turnaround is imminent. 

So what 

November's drop began with management revealing at a conference that the transition to a new fulfillment center in New Jersey isn't going as planned. The move is not only costing a lot more than expected, but management has pulled back on marketing because it was getting orders wrong and didn't want to deliver a poor product to customers. 

Food spilling out of a grocery bag on the floor.

Image source: Getty Images.

Blue Apron lives on sales to new customers because it doesn't retain its existing customers for long, so this fulfillment could take a bite out of an already weak business model. 

Now what 

I don't see anything about Blue Apron's business that's worth jumping into right now. In early December, the company replaced its CEO in a desperate move for such a young company. But the fundamental flaw in Blue Apron's model is that it has low customer retention and has to spend millions on marketing to keep new customers coming in. Unless we see the fundamentals of the business turn around, this is a food stock that doesn't look very appetizing for investors. 

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
APRN
$3.61 (-2.43%) $0.09

*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
319%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/29/2022.

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.