A new low. Blue Apron falls another 16% as NJ fulfillment center eats away at profits

Key Points
  • Shares of Blue Apron plummeted on Tuesday after the company said its new fulfillment center in Linden, New Jersey, was experiencing "unexpected costs" and causing a drag on profits.
  • The company said that it is still training hundreds of workers and the center could take months to be fully operational.
Blue Apron hits new all-time low

Shares of Blue Apron plummeted more than 16 percent on Tuesday after the meal-kit service's CEO said the company's new fulfillment center in Linden, New Jersey, was a drag on profits.

"Today Linden is performing as our worst margin operating center because it's very new," CEO Matt Salzberg said during the RBC Capital Markets Technology, Internet, Media and Telecommunications Conference, according to Dow Jones.

A Blue Apron spokeswoman confirmed the report was accurate.

CFO Brad Dickerson said that Blue Apron experienced "unexpected costs" as it closed its previous facility in Jersey City, 15 miles down the road. Dickerson said that the company is still training hundreds of workers and the center could take months to be fully operational.

The meal-kit delivery company had offered all of its employees the chance to transfer to the new location in Linden. In August, Blue Apron said it expected about 470 workers would not transfer to the new location.

Blue Apron shares have struggled since debuting on the New York Stock Exchange in July. The company, which had an IPO price of $10 per share, briefly saw its stock hit $11 before it began a steady decline. The stock has since fallen more than 72 percent to $3.23.

The average target price for the company's stock has slipped to $5.39 from an average of $9.50 in July, according to FactSet.

Blue Apron's newest fulfillment center isn't its only problem. The meal-kit service saw its number of customers shrink 6 percent in the third quarter from a year earlier, and 9 percent from the previous quarter.

Meanwhile, the average revenue per customer rose to $245 from $227 in the year-ago period. However, that metric was down from $251 in the second quarter.

Blue Apron blamed the drop in customers to purposeful cuts it made to its marketing budget and seasonal trends in the meal-kit business.

With an eye on improving profit margins, the company plans to continue to cut marketing spending in the fourth quarter. This will likely lead to less revenue coming in, Dickerson said on a call with investors last week.

The cuts come as the already-crowded meal kit space becomes even more pressured with Albertsons' purchase of Plated in September and HelloFresh going public in Germany on Thursday.

—CNBC's Angelica LaVito contributed to this report.

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