's up guys and welcome back to wall street millennial on this channel and podcast. Podcast. We cover everything related to stocks and investing. There's an old saying in that if you're fooled once you can't get fooled again.

But in the financial world. This does not appear to be the case corporate executives can burn through billions of shareholder value. But investors will still give them billions more to put into the incinerator. This was especially true during the spack bubble of the past year at the time it seemed like anyone with decent name recognition and a powerpoint presentation could raise a blank check company even celebrities with little or no prior business experience were raising hundreds of millions of dollars.

But perhaps the most outrageous example of the smack market excess involved a man called ron johnson in 2014. He founded a company called enjoy technology. Which promised to revolutionize the retail industry with a novel concept that they called the mobile store in october of 2021 johnson took his company public by merging with a spac raising 250 million dollars in the process. He would use this money to hypercharge enjoy's growth and expand globally after the merger was completed the share price started falling like a rock crossing the one dollar mark by may of 2022 in less than one year.

They had burned through the entire 250 million dollar spac money and in june of 2022. They filed for bankruptcy leaving the shareholders completely wiped out. But this monumental failure shouldn't have come as a surprise as it turns out enjoy technology wasn't the first company that johnson destroyed in 2011. He was appointed ceo of the iconic american department store chain jcpenney.

He started implementing disastrous reforms. Which saw the company's sales decline by almost one third. While he was promptly fired as ceo. The 100 year old retailer never recovered and eventually went bankrupt in this video and podcast.

We'll look at why both jcpenney and enjoy technology failed under ron johnson's leadership. This video was brought to you by moomoo. My commission free brokerage app of choice currently moomoo is running one of the most lucrative promotions in the industry. If you open a new account and deposit.

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Ron johnson first made a name for himself as one of the earliest and most influential executives at apple. He was the driving force behind apple's retail strategy. His idea was to turn apple stores into experiential centers. You don't just go there to buy an iphone.

You go there to talk to the employees and see all the new technology. That the company is developing apple's retail strategy was a resounding success and by the late 2000s. Johnson was one of the most well respected executives in corporate america around the same time johnson was having so much success at apple. Another retailer was having a very different outcome.

Despite its 100 year history. The department store giant jcpenney was struggling to compete against the likes of walmart and the new e commerce players like amazon. The activist hedge fund manager bill ackman bought a 25 stakeholding company thinking that he could turn things around and if you want to turn around a company. One of the most important components is a new ceo.

So he asked ron johnson to come on board. Convincing him to leave his job at apple with a 50 million dollar compensation package johnson had some big plans to change. The company historically jcpenney had relied heavily on discounts to drive its sales. This is one of the oldest tricks in the marketing book.

If you want to sell a shirt for 25 dollars make the list price 50. But give a 50 discount this way you still sell a shirt for 25. But the consumer thinks they got a good deal because it was on sale ron didn't like this approach. He thought that by getting rid of discounting.

He could simplify the shopping experience and the higher average selling price would allow them to carry higher quality brands and the results were disastrous after implementing johnson's reforms jcpenney's comparable store sales declined by 32 percent. This made jcpenney the worst performing of any major retailer by far as it turns out one of the main reasons that customers like jcpenney was their heavy use of discounts shopping. There was like a treasure hunt looking around to find the best discount instead of admitting his mistake ron johnson doubled down on his strategy. He reportedly had disdain for jc penny customers saying that they needed to be educated as to why his new pricing strategy was better in 2013.

Bill. Ackman fired johnson and replaced him with the old ceo who acknowledged fired in the first place during johnson's short tenure. The share price was cut in half many of the customers they alienated never came back and jc penny continued its gradual decay towards zero within a year of being fired from jcpenney johnson founded his own company called enjoy technology. The idea was to transform the retail industry with a new concept.

Which he called the mobile store by this point. It was clear that e commerce was the future. But when a package is just delivered to your door. You lose the experience of talking to a sales representative who can explain to you about the product's functionality.

Johnson's idea was as follows. You order a new cell phone online. Just like you would with a traditional ecommerce platform. Enjoy will then send one of their product experts to drive to your house in a van.

Which they call a mobile store. The android expert will come into your home. And explain how to use a cell phone for up to one hour importantly. They'll also try to convince you to buy accessories and other add ons for example.

If you bought an iphone. They might also try to get you to buy airpods or a subscription to apple music they partnered with mostly cell phone carriers to deliver new phones to people's homes. The partner pays enjoy a fee to deliver the product. But this fee was not enough to cover the delivery costs the only way they could hope to turn a profit is if their sales people can upsell a bunch of accessories to customers once they get inside the house.

They raised some money from venture capitalists to hire hundreds of delivery drivers expanding across the us and even setting up shop in the uk and canada. The problem is they didn't make any money as of 2020 each of their delivery vans made 356 dollars of revenue per day. But it cost 448 to pay the driver's salary and benefits as well as the cost of the van this means that each van lost 93 dollars per day and this is before even considering any of their corporate overhead as it turns out not that many people want a sales person coming inside their homes. And if you need help setting up your iphone.

You're probably just better off watching some youtube videos basically enjoy didn't have a compelling value proposition. They are trying to solve a problem that didn't exist because so few consumers were interested in using enjoy their delivery fans had to drive long distances in between customer visits. This wasted a huge amount of money on fuel and the driver's salary from 2018 through 2021 their revenue increased as they invested in new vans. But the more they expanded the more money they lost in every year their adjusted ebitda loss exceeded their revenue by a wide margin adjusted ebitda is the most favorable profitability metric because it includes depreciation and stock based compensation their net losses were even worse they were basically providing a subsidized delivery service for their retail partners with little hope of ever making any profits high revenue growth is usually impressive.

But not when your business model is selling ten dollar bills for five dollars in 2021. They were given a new lifeline by the spak bubble. They raised 250 million dollars by merging with a stack. But why would investors be willing to give a quarter billion dollars to a company that had such a poor track record on profitability.

The good thing about spax is they give you legal protection to make just about any financial projections. That you want while they had never even come close to turning a profit in the past. They said that they were on the cusp of a turning point and would become profitable by 2023. They also expected their revenue to increase tenfold by 2025 in addition to their financial projections.

They also leveraged the credentials of founder and ceo. Ron johnson. They proudly displayed his accomplishments at apple while conveniently excluding any mention of jcpenney. Even by stack standards their salesmanship was cringy based on their financial.

Forecasts. They expected the share price to increase between 105 and 655 over the next three years. But instead of increasing 105 percent. Over the next three years.

The stock decreased by almost 100 over the next eight months. They used the spac proceeds to open up almost 200 new mobile stores. But this didn't solve the fundamental problem of their poor value proposition and their revenue per mobile store declined. They had the same problem that the more they grew the more money they lost in october of 2022.

They had burned through all the 250 million dollars of smack money. They declared bankruptcy. Having never reported a quarterly profit. It's easy to blame johnson for the failure of enjoy.

But the investors who propped up this failing company also deserved some of the blame and joy had backing from some of the country's premier venture capital funds including kleiner perkins. Which was an early investor in both google and amazon when you've been in a technology. Bull market for the past 10 years every new startup. Looks like it could be the next google.

But at the end of the day. Enjoy was little more than a last mile delivery company that was structurally unprofitable. If it's any consolation to enjoy shareholders the stock price performance of negative 100 is only slightly worse than the average stack. Which has fallen 75 over the past year alright guys that wraps it up for this video.

What do you think about enjoy would you invite one of their salespeople to come into your home. Let us know in the comments section below as always thank you so much for watching. And we'll see you in the next one wall street millennial signing out.