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Stephen Gandel is a Bloomberg Gadfly columnist covering equity markets. He was previously a deputy digital editor for Fortune and an economics blogger at Time. He has also covered finance and the housing market.

If Blue Apron's second-quarter results -- the first it has reported as a public company -- are any indication, the meal-kit delivery company has a kitchen fire on its hands that will be tough to put out. 

Sales were higher than expected, and the company spent less on marketing than Wall Street analysts thought. Those analysts have been worried about what Blue Apron is spending to lure new customers, so some initially saw the results, which were reported before the market opened on Thursday, as good news. But then they noticed the number of customers had declined, and shares fell like a souffle, plummeting as much as 19 percent to the lowest point in their short life.

Down the Drain
Shares of Blue Apron hit their lowest since its IPO
Source: Bloomberg

To make matters worse, while Wall Street has been focused on the company's marketing costs to replace customers who leave, Blue Apron has a much bigger problem: Its overall cash burn rate.

According to its quarterly release, the company spent $118.3 million, or nearly $2 million a day. That means if Blue Apron continues to flambe cash at the same rate, the company's cupboard will be empty by the end of the first quarter of next year.

Blue Apron is likely to put out some of its cash fire, but it will be impossible to extinguish it. For instance, the company spent just more than $90 million in the past quarter upgrading and expanding its distribution centers. That's not an expense its likely to repeat anytime soon, but even excluding capital expenditures, Blue Apron appears to have a spending issue.

Recipe for Failure
So far this year, Blue Apron's costs have risen faster than its sales
Source: Bloomberg, company reports

The company's biggest problem is a chicken-and-egg one. Analysts expect Blue Apron's costs to come down once it expands and can take advantage of more economies of scale. But to get more customers to get that scale, it has to add a lot of complexity -- more dietary options, more combinations of meals, more ability to say allow customers to have two meals one week and five the next. All of that costs money.

Blue Apron's costs, at least for now, aren't coming down as a percentage of sales as many expected they would. So while its sales rose 18 percent from a year ago, its cost of goods sold rose a much faster 28 percent. And then there's that pesky customer problem, which might require even more marketing spending. That's not a recipe for success.

-- With assistance from Sarah Halzack

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Stephen Gandel in New York at sgandel2@bloomberg.net

To contact the editor responsible for this story:
Daniel Niemi at dniemi1@bloomberg.net