Shares of Blue Apron Holdings Inc. (NYSE:APRN) were moving higher for the second day in a row today as the meal-kit service posted a better-than-expected earnings report yesterday and said it had begun selling its meals in a test with Costco Wholesale (NASDAQ:COST), which could be an important growth driver for the company.
After the stock gained 9.5% yesterday, shares were up another 5.2% as of 12:12 p.m. EDT today.
After a terrible 2017 that saw the stock down as much as 83% from its $10 IPO price, Blue Apron finally showed investors that it was moving in the right direction, at least sequentially, as it added customers and grew revenue from the fourth quarter. Both revenue and customer count increased 5% from the previous quarter, though they declined from the year-ago period as revenue fell 20% to $196.7 million and customer count dropped 24% to 783,000. That revenue total was just shy of estimates at $197 million.
Management said the decline was caused by a pullback in marketing following operational problems in the second half of 2017, and said it was "methodically reaccelerating" marketing.
That cut in marketing helped the company narrow its adjusted net loss from $52.2 million to $31.7 million, for a loss of $0.17 per share, ahead of expectations of a loss of $0.24 a share.
CEO Brad Dickerson said, "We are pleased with the progress we achieved this quarter, including significant improvement in operational efficiencies as reflected by our margin performance, which was the strongest we have seen since the second quarter of 2016. We also improved our customer metrics as we began to methodically reaccelerate marketing late last year, with a specific focus on attracting new customers with high affinity as well as deepening our engagement with current customers."
On the earnings call, management said it had begun a pilot program with Costco to sell four-packs of discounted meals at its warehouses, the first step in its plan to distribute in supermarkets. That move could solve two problems for the company: It will lower prices to make its meals more affordable, and will make them more accessible. If successful, the program should bring a noticeable uptick in revenue.
As a long-term goal, the company is eyeing double-digit revenue growth in 2019 and break-even adjusted EBITDA. Still, the meal-kit space is only getting more competitive as Walmart and Weight Watchers prepare to enter, and HelloFresh has taken the lead in U.S. market share from Blue Apron. At this point, the stock may have fallen so much that a recovery isn't surprising, but building a sustainable, profitable business won't be easy.