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Why Shares of Blue Apron Holdings Continue Declining

By Daniel Miller – Updated Apr 10, 2019 at 7:19PM

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If Amazon keeps pressuring the grocery industry, meal kit delivery companies will also feel pain.

What happened?

Shares of Blue Apron Holdings (APRN 30.00%), a meal delivery company that sends consumers fresh seasonal ingredients with recipes, were down over 13% Monday afternoon as continues to shake up the grocery industry.

So what

Amazon's foray into the grocery industry through its Whole Foods Market acquisition in 2017 has forced grocers to lower prices and to innovate delivery options and other solutions for consumers. Amazon is clearly not done yet, and it appears the e-commerce giant is ready to deal another blow to the industry and surrounding companies such as Blue Apron.

Amazon plans to open dozens of grocery stores in multiple major U.S. cities that will be outside of its Whole Foods brand, according to The Wall Street Journal. Amazon plans to open the first location in Los Angeles and possibly two more in early 2020. Amazon is even considering acquiring regional grocery chains with roughly 12 stores to help accelerate its expansion.

Check out the latest earnings call transcript for Blue Apron.

three meals pre-packed on a table

Image source: Getty Images.

Now what

The move makes sense for Amazon, because its expansion will focus on lower-price products versus its Whole Foods stores, enabling the company to avoid cannibalization of sales. And Amazon can develop these new stores for online grocery orders, be it pickup or delivery, which will aid the company's efforts in the online grocery battle. Amazon's expanding grocery strategy obviously pressures traditional brick-and-mortar grocers, but it's also devastating to investors in meal delivery companies that have little to no chance of ever competing with Amazon's scale or distribution network.

APRN Chart

APRN data by YCharts.

Today's decline adds to the growing concern facing Blue Apron investors after the stock recently plunged when Bloomberg reported 15 million shares were being offered at a discount to the price at the time, as well as a disappointing earnings report from its new partner, WW International (formerly Weight Watchers). The truth is simple: If Amazon continues to expand into online grocery, meal-kit delivery companies will continue feeling the pain.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Daniel Miller has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.

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