Blue Apron is cutting about 10% of its corporate workforce as part of a plan to drastically reduce expenses amid stagnant sales.
Meal delivery company Blue Apron has released business updates on the status of funding from affiliates of major shareholder and entrepreneurJoseph Sanberg, its expense reduction initiatives and its liquidity position.
As previously disclosed, on Nov. 6, Blue Apron entered into a pledge agreement under which one of Sanberg’s affiliates pledged shares of private companies to the company to secure the private placement obligation of $56.5 million of Class A common stock. As Sanberg’s affiliate did not fund by the agreed Nov. 30 date, the company now has the right to foreclose on the pledged collateral.
While the New York-based company continues to assess the ability of Sanberg’s affiliate to meet its obligations, Blue Apron is actively working with its financial advisors to maximize value from the pledged collateral, including potentially selling or leveraging the pledged collateral to enhance its credit with its current or future lenders.
Blue Apron is also examining multiple initiatives to both reduce expenses and streamline decision-making/organizational structure, including a plan for meaningful reduction in marketing, consulting and labor spend in 2023. As a result, the company said that it’s cutting its total corporate workforce by approximately 10%. The company anticipates to incur approximately $1.2 million in employee-related expenses, primarily consisting of severance payments, substantially all of which will result in cash expenditures. Blue Apron expects to recognize such expenses in the fourth quarter of 2022.
The company plans to further slash expenses and identified expense reductions of up to approximately $50.0 million in 2023, as compared with 2022, including the newly revealed layoffs. These savings are planned to be implemented throughout the coming year.
Blue Apron is also working to strengthen its balance sheet to maintain compliance with its $25.0 million minimum-liquidity covenant. The company will continue to execute on its at-the-market (ATM) program, if market conditions permit. It believes that it has sufficient cash flow to maintain compliance under its minimum- liquidity covenant in the first quarter of 2023.
In addition, company believes that if it receives the private-placement funds (or the equivalent value from the pledged collateral), funds owed under the gift card agreement, the full proceeds from its current ATM program, and is able to achieve the anticipated benefits of cost savings in 2023 as described above, it will have sufficient cash flow to maintain compliance under its minimum-liquidity covenant into 2024.
Blue Apron continues to work with its financial advisors to evaluate financing and other alternatives, in addition to being in discussions with its lender.
These business updates follow a disappointing third quarter as the company continues to lose customers due to a drop in pandemic-related demand for its meal kits. Blue Apron’s number of customers fell by 7.7% in the quarter ended Sept. 30.