Dive Brief:

• Blue Apron said net revenue increased 18% year-over-year to reach $238.1 million in the second quarter of 2017, driven by an increase in orders and customers. The figure beat Wall Street predictions of $235.8 million. The company said its customer base increased 23% from a year earlier, but declined 9% from the first quarter, reflecting a planned reduction in marketing.
• The company said its marketing expense was $34.5 million, or 14.5% as a percentage of net revenue, in the second quarter of 2017, compared to $32 million, or 15.9%, a year earlier. In the first quarter of 2017, marketing expenses were $60.6 million, or 24.8% as a percentage of net revenue.
• CNBC reported that Blue Apron said it was encountering unexpected costs tied to the start up of its new Linden, New Jersey, facility. The company's stock dropped sharply following the news.

Dive Insight:

Blue Apron's time as a public company has not been without its share of challenges — making its first earnings report Thursday closely watched by investors. After its stock hit the market at $10 a share on June 29, they have plunged about 40% through Tuesday as Wall Street questions its long-term prospects and the need to raise more cash to attract customers.

In late July, Blue Apron co-founder and Chief Operating Officer Matt Wadiak stepped down, although he will remain with the firm serving in a senior adviser capacity. A law firm is currently investigating claims into whether the meal kit company's board breached its fiduciary duty to investors, according to a press release.

The challenge for Blue Apron has been that as the meal-kit preparer boosts sales, it has been spending more to acquire and then retain its new customers. The company made improvements on this front, with marketing expenses of $34.5 million in the second quarter of 2017, compared to $32.0 million a year earlier, but well below the $60.6 million incurred in the first quarter of this year as the company geared up for its IPO. Blue Apron said its average revenue per customer rose to $251 during the second quarter, an increase from $236 in the first quarter, but below $264 a year earlier.

These improvements helped increase revenue 18% to $238.1 million, topping analysts exceptions. Still, Blue Apron lost $31.7 million during the quarter.

“We are beginning a new chapter as a public company, and remain focused on our long-term strategy to build an iconic consumer brand, develop a more diverse product portfolio, and further build out an end-to-end supply chain platform,” Matt Salzberg, chief executive officer of Blue Apron, said in a statement.

CNBC reported that Blue Apron said it was encountering unexpected issues — including higher wage and labor costs and problems transferring volume — to a new facility in Linden, New Jersey, about 15 miles away from another plant in Jersey City, New Jersey. The news service said the company plans to offset these expenses by reining in marketing spending to about 15% to 16% of its second half net revenue. Net revenue during this period is forecast between $380 million and $400 million.

The news of the difficulties facing the new facility were not welcomed by Wall Street, with shares of the company plunging 15% to $5.30 in early morning trading. With other meal kit providers, as well as grocers such as Kroger, Publix and even Amazon moving aggressively in the popular sector, Blue Apron seems to have little room for error as reflected by the sharp drop in its shares on Thursday. Moreover, with cash and cash equivalents of $61.6 million as of June 30, the company may have to look to selling more shares or getting more credit as its costs to attract and keep new customers show no sign of abating anytime soon.