Blue Apron's comeback plan might take a while to start working

Blue Apron has a plan to turn its fortunes around, but it might take a while to get it going.

In a note downgrading the company to a neutral rating, Stifel said Blue Apron’s plan to jump start its business will take several quarters to make a real difference.

Blue Apron recently expanded its product lineup and allowed customers more flexibility in their meal plans, which could potentially boost the company’s low retention rate. But the expansion has been rough and comes at a bad time.

“The company is currently facing challenges with the transition of order volume to its new fulfillment center in Linden, NJ, and is also in the middle of addressing operational challenges with its broader product expansion,” Scott Devitt, an analyst at Stifel, said in a client note.

The meal delivery company is moving 15 miles from its current home to a new facility in Linden, NJ. The move has not been smooth, and the center is ramping up production slower than expected, making fulfilling customer’s orders more difficult.

In addition, increased spending on the new facility has decreased the amount the company can spend on marketing, which is a big way the company attracts new customers. The company has had to spend hundreds of dollars per customer it adds and keeping those customers has been proving difficult. Competition in the space is heating up as well, as huge companies like Amazon muscle their way into the space.

The improvement might be what the young company needs to reverse its luck, but Devitt is lowering his expectations until the promises made by the company’s management materialise.

Devitt lowered his price target $US6, as the company trades just below that at $US5.33.

Blue Apron is down 46.04% since its initial public offering at $US10.

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