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Blue Apron ramps marketing back up, revenue drop smaller than feared

NEW YORK (Reuters) – Blue Apron Holdings Inc (APRN.N) shares jumped 9 percent in premarket trading on Tuesday after the meal-kit maker reported a smaller-than-expected revenue drop and quarterly loss as a costly distribution hub switch forced it to slash marketing.

Sales plunged 13 percent in the fourth quarter from a year earlier, with customers and orders both falling.

Still, Blue Apron said it started to ramp marketing back up in late December, including launching a new national brand campaign, which it credited to improvements at its new distribution center in Linden, New Jersey.

The company had said it would boost marketing expenditure as margins improved. The pullback had come despite mounting competition for customers from meal-kit rivals and Amazon.com Inc (AMZN.O).

Costs as a percentage of revenue improved from the third quarter, thanks to better recipe planning at Linden and seasonal benefits like cheaper packaging and fewer seasonal food items in the fall and winter months, Blue Apron said.

It was the company’s first earnings report under new Chief Executive Brad Dickerson, who joined as chief financial officer in February 2016 from apparel maker Under Armour Inc (UAA.N).

Blue Apron, which was founded in 2012, has had a rocky ride since it went public in June, with shares tumbling nearly 70 percent from their IPO price, under pressure from rival startups and Amazon.com.

The New York-based company was a pioneer in selling subscriptions for pre-portioned meal ingredients paired with recipes for restaurant-style meals, like tilapia piccata and miso-glazed barramundi.

The subscription service had 746,000 customers in the fourth quarter through Dec. 31, compared to 856,000 in the prior quarter and 879,000 a year earlier.

Revenue was $187.7 million, exceeding analyst estimates for $185.1 million. Blue Apron had a net loss of 20 cents a share, beating analysts average estimate for a deeper net loss of 27 cents per share, according to Thomson Reuters I/B/E/S.

The switch to a distribution facility in Linden took longer and cost more than the company had expected, spurring Blue Apron to lower its forecasts for the second half of 2017.

Blue Apron has said that new facilities like Linden would allow more meal options and formats, adding variety that will help retain customers.

Reporting by Meredith Mazzilli; Editing by Bernadette Baum

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