• If it can continue on this path, the company should have a positive low single-digit EBIT margin for the fiscal year of 2020.
• Current customers are increasing their orders, as seen in Figure 3. As this increases, the need to invest in marketing decreases.
• Consumer habits are a hard thing to predict, and to bet that COVID-19 permanently changed these habits is just speculation at this point.

About a month ago, I wrote an article about Blue Apron (NYSE:APRN) taking a few steps in the right direction. In that article, I outlined the following points.

1. Meal-kits have demand because we know that homecooked meals are typically better for us than eating out at a restaurant. Meal-kits appeal to our need to optimize our time through "hacks," which is why we see thousands of YouTube videos with the word "hack this" in them.
2. APRN customers are a very niche group within a niche group. Meal-kit customers are those who want to cook after getting home from work and have decently predictable work schedules. Blue Apron's customers are the ones from the above group who are willing and able to pay ten dollars for an uncooked meal and are also ready to be locked in a subscription program.
3. Blue Apron should focus on customers located in the six states of the eight states found in figure 1. I believe that the company is, which is why it closed down its Arlington facility that was built to attend the projected future demand of customers located in the center of the United States. By focusing on states located close to its facilities, the company can accomplish the following.
   1. They can decrease COGS by decreasing their logistics expenses.
   2. They can decrease their marketing expenses by focusing their marketing on only those locations. At the same time, marketing will be more efficient.
   3. They can decrease their administrative expenses as their logistics will be less complicated.
   4. They will be able to deliver their product to the customer within a day if the customer is close enough to the facility.

Figure 1 - Average Menu Price For On-Premise Dining

Source: Business Insider

Changes Due To COVID-19

Data by YCharts

The stay-at-home order renewed investors' optimism towards Blue Apron, and the company took advantage of this optimism to strengthen its balance sheet. The issue is, does a temporary increase in demand due to a black swan event justify the stock price quadrupling in a matter of days? Yes and no. Yes, if this black swan event was able to change consumer habits permanently. If the demand for APRN's products is the result of necessity, then the answer is no. Once a vaccine for the coronavirus is available to the public, people will have the option to eat out or at home.

READ FULL ARTICLE HERE