Blue Apron (NYSE:APRN) is throwing in the apron. After reporting yet another quarter of continued losses, falling revenue, and customer defections, the meal kit delivery specialist is getting out of the game if it can find a buyer or someone to merge with.

Even though it has actually been quite successful in implementing its business strategy, it was a flawed plan all along. It remains to be seen what, if any, value a potential acquirer would place on a business that is trying to make itself a negligible part of the marketplace.

A Blue Apron meal kit

Image source: Blue Apron.

Planned obsolescence

It had to come to this. When Blue Apron decided it would only cater to existing customers and not place a priority on gaining new ones, it was inevitable the business would deteriorate to such an extent that remaining an independent company would be a monumental task.

Fourth-quarter revenue tumbled 33% to $94.3 million, the third straight period it's lost a third of its sales. While losses narrowed slightly to $21.9 million, it still lost another 35,000 customers sequentially and more than 200,000 in the last 12 months.

 

Q4 2018

Q1 2019

Q2 2019

Q3 2019

Q4 2019

Customers

557,000

550,000

449,000

386,000

351,000

Orders

2,418,000

2,482,000

2,048,000

1,726,000

1,622,000

Average order value

$58.12

$57.15

$58.16

$57.60

$58.14

Orders per customer

4.3

4.5

4.6

4.5

4.6

Average revenue per customer

$252

$258

$265

$258

$269

Data source: Blue Apron SEC filings.

As the table above shows, Blue Apron was winning at its strategy. Average order value was up, orders per customer were up, and average revenue per customer jumped way up. But the number of customers it serves are way down too, and it probably hasn't hit bottom yet.

Acquiring new customers simply became too expensive for the meal kit company to pursue. It spent just $12.1 million on marketing, 40% less than the $20 million it spent last year, which itself was almost 20% less than what it had spent in the fourth quarter of 2017.

Although purposely decimating its customer base was an attempt to make the company profitable, that hasn't happened either, and as the quarter's results show, it is a goal that remains unattainable for years to come -- too many years to continue as a stand-alone company.

Looking for a way out

CEO Linda Findley Kozlowski said in a statement Blue Apron would begin evaluating a broad range of strategic alternatives to maximize shareholder value. Among the options it is considering is a merger with another meal kit company, selling the company, financing deals to raise cash, or even selling off its assets.

Oftentimes when businesses announce they're looking for a buyer it causes their stock to jump as it may mean someone could pay a premium for the stock. Blue Apron's shares, however, plunged 22% on the news. It's a realization that there will likely be few takers for the business, and with good reason.

Beyond trying to limit just how much revenue it could produce by keeping its customer base small, the proliferation of meal kits by rivals like Hello Fresh as well as supermarkets such as Kroger and Walmart means that even the industry pioneer's brand value, to which there is likely still some goodwill attached, is probably much less than would fetch a premium.

He who hesitates is lost

Unfortunately, Blue Apron waited too long. Grocery store chain Albertsons bought meal kit rival Plated in 2017 for $300 million; Kroger bought Home Chef in 2018 for $200 million, but with the potential for $500 million in earnouts; Chef'd ran out of money and was acquired by True Foods for an undisclosed sum.

Considering the way Blue Apron's business is heading, it should've gotten out of the game when consumers thought meal kits still mattered and it was still on top.