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Will Walmart’s Jet.com Save Blue Apron from Being Delisted?

Leo Sun, The Motley Fool

Meal kit maker Blue Apron (NYSE: APRN) went public at $10 per share last June. However, its decelerating growth, the rise of tough competitors, and a marketwide sell-off caused the stock to plunge to just above $1 per share in late October, sparking concerns that it could eventually be delisted.

However, Blue Apron seemed to receive a stay of execution on Oct. 29 when it revealed a new distribution deal with Walmart's (NYSE: WMT) e-commerce subsidiary Jet.com. Blue Apron says that Jet's City Grocery platform will be the "first e-retailer" to offer its meal kits, which will be delivered to "millions of households" across New York City, Jersey City, and Hoboken with same-day and next-day delivery options. Blue Apron will initially offer four types of two-person meals, which will cost between $16.99 and $22.99, along with a $5.95 scheduling fee per order.

Blue Apron meal kits on Jet.com.

Image source: Blue Apron.

Blue Apron's stock rallied 11% after the announcement. But will the deal with Walmart actually move the needle for Blue Apron, which has disappointed investors with double-digit annual revenue declines for three straight quarters?

Yet another partnership...

Blue Apron often announces partnerships or promotions that initially sound promising but fail to generate any real growth.

Over the past year, it started selling its meal kits at Costco (NASDAQ: COST), it partnered with Airbnb to sell meal kits created by Airbnb Experience hosts, added Chrissy Teigen's recipes to its lineup, launched nationwide pop-up stores, and introduced meal kits inspired by the animated series Bob's Burgers. Yet none of those efforts propped up Blue Apron's customer or revenue growth over the past four quarters:

 

Q3 2017

Q4 2017

Q1 2018

Q2 2018

Customers

(6%)

(15%)

(24%)

(24%)

Revenue

3%

(13%)

(20%)

(25%)

YOY growth. Source: Blue Apron quarterly results.

In early October, Blue Apron partnered with Grubhub (NYSE: GRUB) to deliver meal kits across the New York City area. That partnership was odd for two reasons -- customers generally rely on Grubhub and Seamless for prepared meals instead of DIY kits (since they're too busy to cook), and customers in New York already have plenty of delivery and takeout options.

Blue Apron's new partnership with Jet.com faces the exact same problems. In fact, it will probably be even less effective than the Grubhub partnership, since most diners associate Grubhub with food deliveries and not Jet.com. This is further complicated by the fact that Walmart started selling its own meal kits earlier this year to challenge Blue Apron.

A Blue Apron meal kit.

Image source: Blue Apron.

Therefore, if diners actually purchase a significant amount of Blue Apron's meal kits on Jet.com, it would make sense for Walmart to sell its own meal kits on the platform. Jet might let Blue Apron continue selling its meal kits alongside Walmart's, but that would simply resemble the sort of non-exclusive distribution deal it holds with Costco.

Costco's partnership didn't move the needle for Blue Apron, because Costco only sold its meal kits in a limited number of stores alongside other brands of meal kits. Blue Apron's meal kits also likely compared poorly to Costco's own lineup of prepared meals.

The key takeaways

I doubt Blue Apron's partnership with Jet.com will help it any more than its deals with Airbnb, Grubhub, or Costco. The Jet deal could increase Blue Apron's online presence and possibly help it save marketing expenses, but it's limited to a single region that's already saturated with dining options.

Investors also shouldn't confuse the Jet deal with a truce with Walmart. Walmart, along with Amazon, HelloFresh, and other companies, remains a major long-term threat to Blue Apron -- and the company is running out of ways to fight back. Blue Apron won't be delisted unless its stock drops below $1 for a significant amount of time, but its future still looks bleak.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Leo Sun owns shares of Amazon and Grubhub. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends Costco Wholesale. The Motley Fool has a disclosure policy.