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Ishan Majumdar
Ishan Majumdar
Articles (105)  | Author's Website |

Blue Apron: The Meal Kit Demand Is Rising

The meal kit delivery company saw a strong jump in revenues in the recent quarter

Blue Apron Holdings, Inc. (NYSE:APRN) has been looking for a buyer since around February 2020. While there has been little news about the company receiving bids from potential acquirers, its business has certainly received a boost from the pandemic with people staying at home and ordering more meal kits.

With the work-from-home culture expected to become more popular in the long term, the demand for healthy at-home meal services is expected to grow, presenting a promising macro environment for the company.

Company overview

Blue Apron Holdings is a New-York-based company that operates a direct-to-consumer platform delivering meal kits in the form of original recipes along with fresh and seasonal ingredients. Through its meal kits, the company provides various cooking techniques and digital content with respect to how-to-cook instructions. It even includes the stories of its suppliers and specialty ingredients.

Blue Apron also operates Blue Apron Market, an e-commerce market that provides cooking tools, utensils, pantry items and other products, and Blue Apron Wine, a direct-to-consumer wine delivery service that sells wines which can be paired with its meals. All its services are available through order selections on its website or mobile application in the United States. The company was founded in 2012 and employs close to 1,612 people today.

Quarterly results

After the Blue Apron management announced that it was exploring strategic alternatives, including a potential sale of the company, the stock shot up, as seen in the chart above.

The company did witness a shock in the form of the exit of Chief Operating Officer, Alan Blake, who will be leaving on June 1. However, its most recent quarterly result was good overall.

The company reported revenue of $101.9 million and net customer growth for the first time in many quarters. The company reported having 376,000 customers with a 4.9% jump in the average revenue per customer and a 4.4% jump in the number of orders per customer. The loss per share of $1.51 was in line with the analyst consensus estimate and showed improvement over the previous two quarters.

Ramped up capacity

As a result of the Covid-19 pandemic, there has been a significant jump in the demand for meal kits provided by companies like Blue Apron. Thus, under the leadership of CEO Linda Kozlowski, the company is ramping up the capacity of its fulfillment centers. The company recently completed the hiring process of more than 300 people at its fulfillment centers to meet demand. Blue Apron is trying to simplify the order process in order to maximize the speed of delivery. The company is currently operating out of distribution centers in New Jersey and California and might attempt to expand its reach across the country.

Final thoughts

The meal-kit industry has been highly competitive in nature, which is one of the reasons why Blue Apron has struggled to be profitable. Blue Apron faces strong competition from Home Chef by Kroger (NYSE:KR), Martha-Stewart-backed Marley Spoon, Sun Basket and Albertsons-owned Plated. There is also an indirect competition stemming from meal delivery platforms like DoorDash, GrubHub (NYSE:GRUB) and Uber's (NYSE:UBER) Uber Eats.

Blue Apron's niche is that it is considered a healthier do-it-yourself option. The company could thus provide a complementary service as well as strong synergies to a buyer. Whether the management is able to attract such bidders in the near future remains to be seen.

Disclosure: No positions.

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About the author:

Ishan Majumdar
I am a qualified Chartered Accountant with a Masters in Management (Grande Ecole) from HEC Paris. I run a proprietary boutique financial advisory firm called Baptista Research (www.baptistaresearch.com) specializing in M&A, corporate advisory, equity research and valuation of listed companies.

I have nearly a decade of experience spread across investment banks, financial advisory firms, investment funds and other corporates in many different geographies, such as France, Spain, India and others. I was a part of the LBO Financing team at BNP Paribas where I worked on deals with a combined enterprise value of over $1 billion. I have also worked in mergers and acquisitions with Credit Agricole CIB and corporate strategy with Groupe Danone SA. Over the years, I have developed a strong specialization in corporate valuations, strategy and financial analysis.

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