Shares of struggling meal-kit provider Blue Apron Holding Inc. (NYSE:APRN) were heading lower on signs that Walmart Inc. (NYSE:WMT) is entering the packaged-meal fray. After testing out meal kits online, the retail giant now says it will begin selling prepared meals in stores.
As a result, Blue Apron stock finished down 5.1%.
Walmart said it will start selling prepared meals in its stores for the first time, threatening restaurant chains and borrowing a page from more upscale supermarket chains such as Whole Foods Market. Ten different meals are currently available in 250 stores, and the company has plans to expand the program to 2,000 locations. The superstore chain will also begin selling meal kits in stores, priced from $8-$15 for two people, considerably cheaper than Blue Apron's meal, which cost around $10 per person.
By selling meal kits in stores, Walmart can eliminate shipping, a key cost in the industry, and its scale should also help it underprice competitors as well as making the product readily available to millions of Americans.
Blue Apron stock hit an all-time low on the news as the company has been hit by a series of unforeseen events since going public, including Amazon.com's acquisition of Whole Foods and operational challenges at its new fulfillment plant in Linden, N.J. Walmart's entry into the industry is another bad sign for Blue Apron as meal kits make sense as an in-store item in addition to an e-commerce one. Getting acquired may be Blue Apron's best option at this point, though the company is moving more quickly toward profitability under new CEO Brad Dickerson. Still, I'd expect pricing pressure in the industry to increase if Walmart expands this program to all of its stores.