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Blue Apron: Problems Delayed, But Not Solved

Gary Alexander profile picture
Gary Alexander


  • Blue Apron is up sharply after posting Q1 results that featured a much narrower loss than investors were hoping.
  • Despite a small miss on revenues, adjusted EBITDA loss of -$17 million was about half of what Wall Street had expected.
  • The -24% y/y deterioration in customer counts, however, is alarming.
  • Cash burn continues to be an issue, and free cash flow of -$25 million in the quarter eats up Blue Apron's liquidity extremely quickly.

Investors breathed a sigh of relief when Blue Apron (NYSE:APRN) posted Q1 results last week. At face value, the fact that Blue Apron shares rallied to just under $3 isn't that impressive (after all, shares went public at $10 per share), but if you consider the fact that Blue Apron has risen about 60% from its all-time lows in a very short span of time, it's certainly impressive. Investors could have made a bundle by timing the bottom.

ChartAPRN data by YCharts

The question for investors now is: is Blue Apron on a course for recovery, or is this rally a temporary phase that will recede back into a doom-and-gloom narrative?

There were certainly positive elements in the quarter. Blue Apron's improvement in gross margins is one of the biggest highlights, as the deterioration of gross margin was one of the chief causes of Blue Apron's losses. The company has finally begun to achieve cost benefits from the opening of its troubled distribution facility in Linden, New Jersey.

But on the whole, I don't think Blue Apron's prospects have changed much. In the third quarter, orders on the platform declined 19% y/y to 3.5 million. Likewise, active customers dropped 24% y/y to just 786k. Is it possible to sustain a business where customers are contracting?

Source: Blue Apron investor relations

Blue Apron bulls will point to the fact that orders per customer are up to 4.4 in the quarter, from 4.1 in 1Q17. The fact that average revenue per customer is also up 6% y/y to $250 is also a positive sign. These customer metrics altogether tell a fairly obvious narrative: Blue Apron's more casual users, perhaps those who ordered only on the sign-up bonus, have begun to defect, while its core customer base has slightly stepped up their order frequency.

This article was written by

Gary Alexander profile picture
With combined experience of covering technology companies on Wall Street and working in Silicon Valley, and serving as an outside adviser to several seed-round startups, Gary Alexander has exposure to many of the themes shaping the industry today. He has been a regular contributor on Seeking Alpha since 2017. He has been quoted in many web publications and his articles are syndicated to company pages in popular trading apps like Robinhood.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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