Turnaround Letter Buy-rated Blue Apron (APRN) reported revenues, net loss and EBITDA that were slightly below estimates, but all showed meaningful improvement from a year ago. Relative to the second quarter, results look weak but Blue Apron’s strong seasonality makes the comparison less meaningful.
Revenues fell 34% year-over-year, as the company has slashed its marketing expenses to winnow out low-value customers and to help reduce its cash burn. In the quarter, Blue Apron made progress on both. Its customers were higher-value: orders per customer increased 10% and average order value increased just over 1%. Cash outflow of about $9 million was less than half the outflow of a year ago. Importantly, Blue Apron is keeping its core customers despite slashing marketing costs almost in half from a year ago. Blue Apron’s gross margin appears nearly maxxed-out, albeit at a much-higher level than in prior years, so with its operating costs relatively stable other than marketing costs, further revenue growth is needed to expand profit dollars.
Revenue growth is the next step in Blue Apron’s strategy, to be driven by more and better-focused marketing spending and more-relevant products. The company said it was confident that year-over-year revenue growth would start in mid-2020. Under new CEO Linda Kozlowski, Blue Apron is trying many new and creative initiatives that show decent revenue-producing promise.
Helpfully, the company refinanced its debt, which extended the maturity date by six months, to August 2021, but on modestly more expensive terms. The company’s turnaround is making slow but steady progress under its much-improved leadership team.
Blue Apron Press Release: 3Q Earnings
We continue to rate shares of Blue Apron as a Buy with a $30 price target.
Disclosure Note: One or more employees of the Publisher own shares of all Turnaround Letter recommended stocks, including APRN.