$APRN - Blue Apron to end partnership with Walmart’s Jet.com but continue with Weight Watchers

Blue Apron will focus on its core meal kits — and its core demographic

Weight Watchers International Inc. is in, but Jet.com is out.

Meal-kit service Blue Apron Holdings Inc. APRN, -0.71%   announced on its earnings call that it’s going to end its pilot with Walmart Inc.’s WMT, -0.43%   e-commerce site, called Jet.com, in the coming weeks, but it will continue its partnership with diet and nutrition club WW WW, +38.93%   .

“As we’ve said before, Jet has been a great partnership through which we’ve built valuable on-demand competencies, many of which we are now applying to future considerations for our model,” said Linda Kozlowski, Blue Apron’s chief executive, on the earnings call, according to a FactSet transcript. “Right now, however, we need to focus our efforts on our core business – engaging with our customers week-in and week-out on our platforms through our direct-to-consumer service.”

For partnerships, Kozlowski said it will look for opportunities with “large, highly-engaged communities whose interests and values overlap with those of our best customers.”

Blue Apron now aims to target the largest groups and demographics with like-minded members to maximize opportunities, including single-person households and empty nesters, as well as those with or trying to adopt healthy habits.

“The research is clear that cooking fresh food at home is healthier than takeout or restaurant dining,” said Kozlowski. “And many consumers who want to be healthy are not willing to sacrifice on taste or quality to do so and they shouldn’t have to. Our partnership with WW has proven to us just how hungry Blue Apron customers and specifically our best and most profitable customers are for this type of solution.”

Blue Apron also aims to add more flexibility in its products and services for those looking for healthy alternatives. This is where Beyond Meat Inc. BYND, +0.87%   and the plant-based Beyond Burger come in.

“After announcing our new Beyond Burger recipes, we saw strong interest from customers, even weeks out from shipping,” said Kozlowski.

Building on this effort, Blue Apron will bring a number of new fruits and vegetables in September, including Chinese broccoli, nectarines and shishito peppers. And they’ll give customers the option to swap out ingredients, like carbs for extra protein or vegetables.

“[I]t’s become clear that the more attractive opportunity for Blue Apron right now is in our core direct-to-consumer model, avoiding many of the challenges of inventory management and shrinkage,” Kozlowski said.

Blue Apron’s second-quarter losses narrowed year-over-year and revenue fell to $119.2 million from $179.6 million in 2018, missing the FactSet consensus.

“We view these results as positive early signs of management’s focus on greater operating efficiencies and cost containment as it looks to target fewer but higher-quality customers to re-accelerate growth,” wrote SunTrust Robinson Humphrey analysts.

Expanding its core offering “should help [Blue Apron] achieve customer and revenue growth in 2020,” SunTrust said. Analysts think Blue Apron could be a potential acquisition because of its strong brand and prior acquisitions in the meal kit space, which includes Albertson’s purchase of Plated for about $200 million and Kroger Co.’s KR, +0.58%   purchase of Home Chef for about $200 million plus possible $500 million in incentives.

SunTrust rates Blue Apron stock hold with a $10 price target, slashed from $25.50.

Blue Apron stock is down 4.4% in Wednesday trading, and down 47% for the year to date. The S&P 500 index SPX, -0.74%   has gained nearly 13% for 2019 so far.

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