It's not as though anyone is expecting Blue Apron (APRN) to offer much in the way of good news when it reports third-quarter earnings on Halloween -- it's a matter of just how scary they will be.

The meal-kit maker itself has effectively admitted it needs to go still lower before it can begin to grow once more. So the questions investors need to ask are: Where is the bottom? And will this quarter's results take Blue Apron a good way towards that point?

Woman with credit card in front of a laptop and a pile of fresh produce

It seems hard to believe customers will be ready to buy Blue Apron's meal kits once more. Image source: Getty Images.

Losses expected to grow again

It's clear Blue Apron is a mess. During its second-quarter earnings conference call, chief financial officer Tim Bensley gave a pretty dour forecast of what the company was expecting.

Net revenue is forecast to match what occurred over the first six months of 2019: a more than 30% decline year over year, with net losses in the third quarter of $26 million to $29 million -- barely an improvement over the $34 million loss recorded a year ago. It's also decidedly worse than the $5.3 million loss recorded last quarter that had given investors so much hope. And Blue Apron doesn't expect any growth until the first quarter of 2020.

A good part of the reason for the worsening picture is that Blue Apron plans on shelling out more cash on marketing again. The company lives and dies on whether it tries to bring in new customers. When it spends, the customer rolls grow; when it doesn't, they wither away.

Taking off the rose-colored glasses

Turnover is a huge problem for Blue Apron and other online meal-kit companies. But it's expensive to keep spending, it eats away at margins, and ultimately it's unsustainable at the rates needed to continuously grow the business.

However, Blue Apron has dramatically narrowed the lens on who it considers its target customers. Whereas the meal-kit specialist originally saw the entire $1.3 trillion grocery and restaurant market as its universe -- basically, everyone who ate -- it's since decided to confine itself to the somewhat more realistic $9 billion market represented by singles and empty nesters who buy groceries online.

That's some 50 million households. Over the next few quarters, Blue Apron plans to increase its marketing spend, relative to the first half of the year, to attract them.

Will they come?

At $9.7 million in the second quarter, Blue Apron's marketing budget was virtually nonexistent compared to the same period in 2018, and even first-half spending of $24 million was just a third of what it had spent the year before. So any incremental increase could pay off with a few more customers than the 440,000 it reported last time -- but I'm not so sure.

One of the last times Blue Apron increased its market spend, it still lost customers. Shortly thereafter it gave up on the idea, reconciled itself to being a smaller business, and conserved its cash. And since then, its customer base has imploded.

At the end of the second quarter last year it had 717,000 customers, but 12 months later the number had plunged to 449,000 customers. With even more competition on the market, Blue Apron's premium pricing undercut, and kits available conveniently just about everywhere, there's little reason consumers would want a narrow selection of curated meals. Even with more marketing, they might not respond.

What's in it for investors?

Blue Apron, however, is getting down to its true core customer. While it did lose tens of thousands of customers sequentially last quarter, the ones who remained spent more and ordered more, meaning that they really like it. The problem is that that's not very many -- certainly not enough to sustain a business or make Blue Apron's stock a good investment.