Earnings Outlook: Blue Apron earnings: What’s happening in New Jersey?
When Blue Apron Holdings Inc. reports earnings Tuesday morning, the key to the results will not be in the meal kits arriving at customers’ homes but at a large warehouse in New Jersey.
Blue Apron’s APRN, -11.89% decision to move East Coast fulfillment operations to a new New Jersey location has led to months of problems for the company, which has talked about having to pay for two fulfillment centers at once and pause some marketing efforts while the transition was under way. Tuesday’s earnings will show how much progress Blue Apron has made in moving past these obstacles and getting the new Linden, N.J., facility to run smoothly.
In a late November filing, Blue Apron said that the Linden center’s on-time-in-full rates, which measure whether a delivery comes at the right time and with the right components, were “in line” with those at the company’s other locations.
“As expected, our margins since the end of the third quarter have significantly improved,” then-CEO Matt Salzberg said in the filing.
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Some analysts are optimistic about the company’s progress with the new center. “Recent data points (company commentary, insider stock purchases, and search trends) suggest Blue Apron is turning the corner on Linden into the seasonally-important first quarter marketing period,” wrote Gabelli & Co. analyst Matthew Trusz, who recently initiated coverage of Blue Apron with a buy recommendation.
Overall, though, expectations for Blue Apron are relatively low. Analysts tracked by FactSet expect that revenue fell 14%, to $ 184.8 million, for the quarter. Meanwhile, they expect that losses roughly doubled to $ 51.5 million.
Shares have fallen 30% since Blue Apron’s last earnings report, while the S&P 500 SPX, +1.49% has been flat. Blue Apron’s stock is down 65% since its late-June IPO, compared with a 6.5% rise for the S&P 500 over that time.
What to expect
Earnings: Analysts expect that Blue Apron had an adjusted net loss of $ 51.5 million during the December quarter, or 27 cents on a per-share basis. The company posted a $ 26.1 million loss a year ago.
Revenue: Blue Apron’s revenue is expected to fall to $ 184.8 million for the December period, from $ 216 million in the year-earlier quarter, according to FactSet. Analysts expect average order value to fall slightly, to $ 58 from $ 58.78.
Stock movement: Blue Apron has reported two quarters so far as a public company. Shares dropped 18% following the company’s first release and 19% after the second one. The company missed earnings expectations both times, while beating on the top line.
Sixteen analysts cover Blue Apron, according to FactSet. Four rate the company a buy, 11 rate it a sell, and one rates it a hold. The average price target among analysts tracked by FactSet is $ 5.27, 60% above current levels. Blue Apron went public at $ 10 a share.
What else to watch for
Blue Apron announced late last year that co-founder Matt Salzberg was stepping down from the CEO post, with CFO Brad Dickerson taking his place. Analysts in general praised the leadership transition, with Ross Sandler of Barclays calling the move a “positive” due to Dickerson’s “experience and operational background.” He previously held CFO and COO roles at Under Armour Inc. UAA, +4.64%
The company said at the time that it would begin a search for a new CFO, so investors will be looking for updates on how that process is going, as well as any insight into how Dickerson’s priorities for the company may be different that Salzberg’s were.
See: Analysts’ thoughts on Blue Apron’s CEO change
Also important will be any commentary on marketing costs. Blue Apron has had to spend heavily to acquire new customers given relatively high churn for the service. Management said recently that the firm would tweak its mind-set on marketing, by spending more on retaining existing customers and less on attracting new ones.
It will be worth looking at the dollar amount for Blue Apron’s marketing spending, as well as any statements from the company on strategy or effectiveness. Blue Apron said during the fulfillment center transition that it was pulling back on marketing to new customers because it was worried about sending people wrong orders while it worked out some operational kinks. Look for commentary as to whether marketing spending has returned to normal.
Sandler wonders if Blue Apron’s marketing pullback during the transition ended up benefiting rival HelloFresh SE HFG, +4.08% in the form of share gains.
“HelloFresh seems to be filling the void left behind from Blue Apron’s marketing reductions,” he wrote in December. Sandler has an equal weight rating on shares.
Also noteworthy will be the impact of the company’s efforts to introduce more flexibility into the ordering process. Blue Apron traditionally made users choose three different meals a week, with two servings each, but it has been exploring options that let customers buy a few more or less than that. The company has also been trying to introduce more 30-minute meals that aren’t as difficult to cook.
Finally, it’s worth paying attention to any insight from management about efficiency at the Linden fulfillment center, which is intended to be the most automated once fully functional.
“The completion of the Linden fulfillment center migration will likely help Blue Apron realize natural gross margin improvement from the consolidation of Northeast operations into a single fulfillment center,” KeyBanc analyst Ed Yruma wrote late last year. He has a sector weight rating on shares.