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Published: Sat, November 04, 2017
Economy | By Melissa Porter

Blue Apron's business model is broken

Blue Apron's business model is broken

The number of customers Blue Apron served in the third quarter shrank 6% from the year-ago quarter and 9% from last quarter.

More and more customers are abandoning Blue Apron's meal kits. Some of that decline was due to the summer, when customers often stop food orders. Blue Apron was billed as a growth company, though, so a small increase doesn't match Wall Street's hopes.

Berlin-based HelloFresh's shares rose as much as 4 percent on their first day of public trading on Thursday, valuing it at more than double Blue Apron.

Blue Apron also said it now expects to lose between $131 million and $138 million in the second half of the year. In the last release, Blue Apron warned that a shift in its fulfillment operations was complicating the business, and this news caused shares to plummet.

Blue Apron on Thursday also scrapped plans to build a facility in Fairfield, California.

According to new data from Second Measure, a company that analyzes billions of anonymized debit and credit card purchases, Blue Apron's market share declined 17 percentage points in September from 57.5 percent a year earlier, while most other meal kit services gained market share in the $5 billion US meal kit market. In the third quarter, marketing cost $32.4 million, or 16.3% of its revenue, down from $49.6 million, or 24.2% of its revenue in the year-ago quarter. Average revenue per customer increased to $245 from $227 from the same time a year ago, but down from $251 last quarter.

The good news is that Blue Apron resolved a short-term issue that had been weighing on the stock. On a per-share basis, Blue Apron lost 47 cents, bigger than the 42 cents analysts had expected.

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