We can't say that we didn't warn you...
Shares of Blue Apron plunged Thursday after the meal-kit delivery company said during its earnings call that it was encountering unexpected costs tied to starting up a new facility.
These costs, as well as further cuts in marketing spending, will likely result in more losses in the second half of the year.
Blue Apron now estimates that its net loss will be between $121 million and $128 million in the second half while net revenue will fall between $380 million and $400 million.
Blue Apron also reported an EPS loss of 47 cents, a pretty solid miss on the consensus estimate of a 30 cent loss per share. And while most everything in the results is pretty terrible, what should concern investors most (beyond the fact that something inside them told them it was a good idea to buy Blue Apron stock) is this:
Although the number of customers rose 23 percent year over year, the company said the client base shrank by 9 percent from the first to the second quarter due to a planned $26.1 million reduction in marketing expenses.
The only possible chance that Blue Apron has to avoid life as a $4 day trader stock is to grow out its client base. At some point in recent years, the market seems to have decided that it can overlook all fundamentals on a techie stock if the company is growing users. Blue Apron has essentially laid out a dogshit numbers buffet and a shocking amount of people have bought it anyway because there was a semblance of hope that people might start using the recipe-in-a-box service on a scale large enough for Blue Apron to start harvesting data. But it now seems readily apparent that the only way for the company to grow that base is to keep spending on marketing like the very drunkest of proverbial sailors. And even if does continue to sponsor literally every fucking podcast, there is little chance that will even help in the long-term considering Blue Apron's comically poor track record with customer retention.
It's a Catch-22 at the heart of Blue Apron's business model, and one that should have been worked out in private, not on the publicly-traded market.
And with what is now a clearly very challenging operations problem that highlights just how exposed Blue Apron is to being potentially eviscerated by Amazon, Blue Apron is making it clear to all that its entry into the public markets is one of the biggest clusterfucks in modern financial history.
It's fun to blame stuff like this on greedy entrepreneurs, but you really can't blame the guys running Blue Apron for trying to cash in on a nice little business that they built from scratch. In this case, our ire is still reserved for APRN's underwriters, namely Goldman Sachs and Morgan Stanley (we'll let Citi and Barclays off the hook as they were understandably just happy to be invited to any kind of IPO party). It's borderline immoral that no one at either bank sat the Blue Apron guys down at some point and explained that Blue Apron had no business being a publicly-traded business.
What we're also seeing is that Goldman and Morgan have now reached a point where they firmly believe they can peddle any kind of tech shit and call it gold. Which...coo, bros.
A lot of you are going to roll your eyes and accuse us of overstating for the sake of dramatic phrasing, but this whole thing is objectively fucking bananas. Almost everyone involved with the Blue Apron IPO that wasn't working at Blue Apron had a lot of experience with taking companies public and a fairly strong grasp of how stocks work. So we have to ask, how did Blue Apron ever go public considering that it is maybe the worst stock to ever come to market?
Too strong? Name a worse stock, we dare you.