Blue Apron (NYSE:APRN) was on its way to possible dissolution until the coronavirus pandemic struck.
Only just last month the meal kit delivery specialist was talking about strategic alternatives for its business that included merging with another meal kit company, selling the company, financing deals to raise cash, and selling off its assets.
It was hemorrhaging customers, revenue was plummeting, and though adjusted EBITDA improved, it was still recording losses.
And then COVID-19, the disease caused by the coronavirus, hit with a vengeance, and if states didn't mandate it, people began voluntarily practicing social distancing and self-isolation. Having food delivered to the house became necessary if not required. Blue Apron actually had a purpose, and a vital one at that.
A reason for being
CEO Linda Findley Kozlowski noted in a recent SEC filing Blue Apron was witnessing "a sharp increase in consumer demand," which was leading the meal kit delivery company to increase its capacity so that by the end of the month it will be able to fulfill the orders.
The uptick in orders actually disrupted some of the orders it was already fulfilling, causing it to change recipes and box orders, but business is so good right now that Blue Apron is actually hiring.
The company is looking for both temporary help and permanent employees at its fulfillment centers in New Jersey and California, suggesting it believes the heightened demand it is experiencing is going to last longer than just the length of the pandemic.
Importantly, Blue Apron also says that it hasn't seen any disruptions to its supply chain in ways that many other companies have, so where supermarkets such as Walmart and Kroger have seen a crush of consumers clearing out shelves of food products, along with the hand sanitizer and paper goods, the meal kit company has been able to offer its customers a steady hand in availability.
While no one would hope for such a cataclysm, it's possible the pandemic may have saved Blue Apron's business.
Betting on change
The market certainly thinks so, as shares of the meal kit specialist, which traded down to near penny stock levels, having lost over 98% of their value from its IPO, have since soared over 500%.
Still, investors should remain skeptical that the change will last. Keeping customers has always been the primary problem facing Blue Apron, and it has had to expend exorbitant sums on marketing to continuously attract new subscribers.
It finally realized that was like trying to herd cats with a broom and decided its best course of action was to primarily serve just those customers who had proven they liked the service and would spend money on it. Its quarterly results showed it was successfully achieving its goal, as average order value had risen, orders per customer were up, and average revenue per customer had jumped. Yet that also meant Blue Apron was destined to be a small, niche business.
Even Koslowski says not to construe the change of fortunes as "a prediction about current or future performance of the company." While that's a bit of boilerplate from the legal department, she admits the situation surrounding COVID-19 is fluid and situations could still arise that affect the company's ability to serve its customers.
A return to normalcy
The pandemic has given Blue Apron the kind of marketing visibility it used to have when it paid for it, so investors may see a big jump in new subscribers when it reports next quarter's earnings. While a bunch of those may eventually stay, the business still faces the same structural problems it had before that people don't want to pay for meals to be delivered, especially when they're available in their local supermarket.
Blue Apron is benefiting from a unique circumstance that has elevated food companies, and no doubt many are appreciative it exists to fill a need right now. But thankfully such events are not recurring and the meal kit business likely need to go back to considering strategic alternatives as opposed to looking for ways to expand.