Blue Apron (NYSE:APRN) recently posted its third quarter earnings, and the mixed report indicated that the meal kit maker's headaches were far from over. Its revenue dropped 28% annually to $150.6 million, missing estimates by $7 million and marking its steepest decline since its IPO.

Its net loss narrowed from $87.2 million a year ago to $33.9 million, or $0.18 per share, beating expectations by four cents. Its adjusted EBITDA loss also narrowed from $48 million to $18.8 million. Unfortunately, those numbers indicate that Blue Apron's core business is still deteriorating, and its stock could head lower for four simple reasons.

A Blue Apron meal kit.

Image source: Blue Apron.

1. Fading revenues and disappearing customers

Blue Apron's year-over-year declines in customers and revenue have been accelerating over the past year. Most investors won't return unless those numbers stabilize.

 

Q4 2017

Q1 2018

Q2 2018

Q3 2018

Customers

(15%)

(24%)

(24%)

(25%)

Revenue

(13%)

(20%)

(25%)

(28%)

YOY growth. Source: Blue Apron quarterly results.

Its average orders per customer barely changed over the past year as its growth in average order value and average revenue per customer faded -- leaving the company with no way to offset its double-digit declines in customers.

 

Q4 2017

Q1 2018

Q2 2018

Q3 2018

Orders per customer

4.3

4.4

4.4

4.1

Order value*

(1%)

(1%)

(3%)

(2%)

Revenue per customer*

1%

6%

(0%)

(5%)

*YOY growth. Source: Blue Apron quarterly results.

2. What moat?

Blue Apron initially enjoyed a first mover's advantage in the meal kit market, but it lacked any meaningful ways to counter competition from rival meal kit makers, fast food chains, and supermarkets -- which could simply package their own groceries into smaller DIY kits.

That's why rivals like Amazon, Walmart (NYSE:WMT), and Kroger opted to launch their own meal kits instead of buying Blue Apron, which has an enterprise value of just $250 million. HelloFresh also overtook Blue Apron as the biggest meal kit maker in the US earlier this year according to Earnest Research.

3. Cutting costs instead of expanding

With its core business stuck in a nosedive, Blue Apron focused on cutting costs by laying off employees and scaling back its marketing efforts. Those efforts reduced its total operating expenses by 27% annually during the first nine months of 2018, but also crippled its ability to meaningfully expand its services to counter the competition.

A Blue Apron meal kit.

Image source: Blue Apron.

Blue Apron's cash and equivalents fell from $266.3 million to $162.9 million between the third quarter of 2017 and 2018. It's also burdened with $83.5 million in long-term debt.

Blue Apron clearly needs to conserve its cash, but it would arguably be smarter -- albeit also riskier -- to spend some of its cash and take on more debt to acquire smaller rivals, launch new products or services, or initiate aggressive marketing blitzes to boost its revenues instead of trying to generate a profit.

4. Meaningless partnerships

Instead, Blue Apron is launching partnerships that sound impressive but ultimately accomplish nothing. It partnered with Costco (NASDAQ:COST) to sell meal kits at some of its locations earlier this year, but the deal was flawed: Costco also sells other companies' meal kits as well as its own pre-cooked meals.

It recently started offering meal kits on Grubhub's (NYSE:GRUB) platforms and Walmart's Jet.com for the New York City area, but people generally use Grubhub for prepared meals and Jet.com for non-food products. Customers in the New York area also have an abundance of takeout and delivery options to choose from. Walmart could also be merely using Jet.com's partnership with Blue Apron to test the waters for launching its own meal kits online.

Blue Apron's other partnerships, like its team-up with Airbnb to sell meal kits created by Airbnb Experience hosts, suffer from similar problems. The company likely sees these deals as ways to reach new customers without increasing its marketing expenses, but they don't offer compelling reasons to buy meal kits rather than order take out or prepared meals instead.

Is there any hope left?

Blue Apron's business model worked when it was a start-up, because its meal kits appealed to urban, health-conscious professionals who wanted to cook but didn't want to buy a wide range of ingredients and look up recipes.

Unfortunately, that business model was easily replicated, and new competitors throttled its expansion. Unless Blue Apron figures out how to break out of this vicious cycle, its revenue growth will continue to decelerate and leave it with very little room to squeeze out a profit.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Leo Sun owns shares of Amazon and Grubhub. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends Costco Wholesale. The Motley Fool has a disclosure policy.