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How Do Blue Apron’s 4Q17 Revenue Numbers Stack Up?

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Reduced market spending impacts top line

On February 13, 2018, Blue Apron (APRN) reported 4Q17 net revenues of $187.7 million, which easily beat the analysts’ estimate of $185.1 million. However, on a YoY (year-over-year) basis, its net revenues fell 13.0% as the company reduced its marketing spending considerably.

This spending reduction was made as the company diverted resources to accelerate the operations at its Linden, New Jersey, fulfillment center. This resulted in a reduction in its customer count and orders.

In 4Q17, Blue Apron’s customer base shrank 15.1% YoY to 746,000, and its orders decreased 13.0% to 3.2 million. The average order value was $57.99 in 4Q17, down from $58.78 reported in 4Q16.

However, the company’s average revenue per customer was $248.00 in 4Q17 compared with $246.00 in 4Q16. Its orders per customer also increased to 4.3 compared with 4.2 in 4Q16.

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Cautious near-term outlook

Blue Apron’s (APRN) management expects its reduction in market spending to negatively impact its net revenues in 2018. The company’s total revenues for 2018 are expected to be down on a YoY basis, and its 1Q18 revenues are expected to be impacted most heavily.

However, the company expects its net revenues for 1Q18 to be better than its net revenues in 4Q17. Blue Apron management forecasts its 1Q18 net revenues to reach $190.0 million–$200.0 million.

This improvement is expected, as the company stepped up its marketing efforts in the last week of December 2017. The analysts’ net revenue estimate for 1Q18 stands at $197.3 million.

More room at the table

Although Blue Apron (APRN) is the biggest name in the meal kit delivery business, rival HelloFresh has been rapidly gaining market share. According to Food Dive, the German company’s president of North America operations, Tobias Hartmann, said that HelloFresh would likely replace Blue Apron as the market leader by 2Q18.

Upon completion, the acquisition of the Whole Foods supermarket chain, which specializes in selling organic food, is expected to give Amazon (AMZN) an added advantage with respect to the meal kit service business.

Walmart (WMT) has also jumped on the bandwagon and has started to sell third-party meal kits. In December 2017, Kroger (KR) launched its Prep+Pared Meal Kits in 200 more locations with more to follow.

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