“We started with a simple question, ‘What if the best of the retail store experience could come to you?’”

So reads the prospectus Enjoy Technology issued last year around the issue of millions of new shares of stock, following a merger with a special purpose acquisition company, or SPAC.

Founded by Ron Johnson, who spearheaded Apple’s lauded retail business before leading a famously disastrous transformation as chief of J.C. Penney roughly a decade ago, Enjoy has tried to do nothing less than build out a new channel of retail by filling a vacuum between e-commerce and stores. 

“[T]he current e-commerce experience has one fundamental flaw: It ends with a package at the door,” the company says, describing its positioning in the market. “Brands lose the personal connection to their customers, their ability to provide in-person advice and support, and their ability to upsell products and services as online retail continues to gain share.”

Enjoy’s answer to this is the mobile store: roving trucks with salespeople and inventory, with expert staff who can sell, advise and install, all in customers’ homes. In a video, Johnson says that, “we have invented the next disruption in commerce.”

There’s one big problem though: Those stores meant to disrupt the industry are hemorrhaging money at an accelerated rate. And the company is running out of cash to fill the gap.

Product shortfalls

The company launched operations in 2015. Today the company has roughly 650 mobile stores in North America that in Q1 generated an average of $355 in revenue a day, down from $404 last year. As of the second half of 2020, Enjoy was profitable in 18 of its U.S. markets, according to its S-1.

Rather than buy inventory and sell it to customers, as most retailers do, Enjoy brings in revenue by contracting with brands and suppliers for services, and taking inventory on consignment. 

Its partners have included AT&T, Apple and other electronics makers. In its filings, the company has said it sees opportunities for itself in other categories, including fitness, luxury apparel, beauty and automotive. As for those who would want a “commerce-at-home” service, Enjoy sees its consumer as “almost everyone,” pointing to younger consumers (millennials and Gen Z), busy parents, remote workers, “demanding pros,” and “the not-so-tech-savvy.”

The model may work at scale, but, as Lamont Williams, an assistant vice president at investment bank Stifel’s equity research unit, said in an interview, “What’s not attractive at a certain scale?”

Williams pointed to densely populated areas where Enjoy’s model did best. “There were some markets that they were where the unit economics work,” Williams said. “At scale, it can work. But anything really can work at a certain scale. It’s just a matter of if you can get to that scale and when.”

Last October, Enjoy debuted on the Nasdaq public stock market after merging with Marquee Raine Acquisition Corp., a SPAC formed in fall 2020 and incorporated in the Cayman Islands as a “blank check” buyer of operating companies. It was headed by CEOs Crane Kenney, president of the Chicago Cubs baseball organization, and Brett Varsov, who heads M&A for the merchant bank Raine Group. 

Less than a month later, Enjoy reported total sales growth of 13.4% for the third quarter, which fell short of analyst estimates. Slowing the company’s top-line growth were supply constraints around the latest Apple products, which at the time knocked off up to $2.5 million from the company’s weekly revenue. 

The losses on the company’s mobile stores for Q3 came in more than four times higher than estimates from Telsey Advisory Group analysts at the time. The analysts said then that the constraints on Apple products and other issues “masked Enjoy’s long-term story and progress on key initiatives, including accelerated mobile store growth, expansion of the Apple relationship, and the newly launched Smart Last Mile solution — all supporting the favorable industry shift to Quick Commerce.”

In its 10-K for 2021, Enjoy noted that it had built up its field teams, anticipating increased demand for the back half of the year. “However, due to product availability delays due to supply chain issues, our gross margins were worse compared to the first half of the year,” the company said. 

Along with adding staff to its mobile stores, Enjoy has also been spending more on fuel — with costs for gasoline undergoing rapid spikes — as well as leases and insurance for vehicles, and leases on warehouses, which have increased with Enjoy’s entrance into new markets. 

Despite the troubles in the latter part of 2021, Enjoy said in November that it planned to expand into 100 new markets in 2022 and accelerate the rollout of its Smart Last Mile service, which aims to mesh an in-person retail experience with door-to-door delivery. Johnson said on a March call with analysts that inventory levels were “headed in the right direction.”

Cash crunch

The company’s plans could be in trouble, though. With losses mounting, the company has come into a serious cash crunch. 

For the first quarter of this year, those stores racked up a $9 million loss, nearly triple the loss for that segment last year. In its latest 10-Q, released in late March, Enjoy said it did not have enough cash to meet its needs beyond June, and it has not issued an update since then. The company said it could have to file for bankruptcy, and it has included in recent filings “going concern” warnings that it might not be able to stay afloat.

Enjoy also disclosed then that it hired advisers, specifically investment bank Centerview Partners and the consulting firm AlixPartners, which both do restructuring work along with other areas of advising.

In a troubling sign, Enjoy has lost two chief financial officers in roughly as many months. Following the departure of interim CFO Cal Hoagland, the company didn’t announce a transition plan to fill the role, which analysts with Telsey highlighted in a note at the time. 

The analysts also said that the finance chief’s departure, combined with a lack of any updates on new capital, “does not bode well for the future.” By then, the research firm had lowered its stock rating for Enjoy from Outperform to Market Perform to Underperform over a handful of months.

Enjoy has more than $6.1 million in prepayment from an unnamed business customer for anticipated services, as well as a $10 million loan from Johnson, to get by while it reviews its strategic options, which could include a sale of the company.

Enjoy could also scrounge some capital somewhere, but it finds itself today in a financial market that is tightening up amid fears of an economic downturn. “The problem is the access to capital across the board has gotten really difficult,” Williams said. “We’ll see, but you’ve got to raise in an environment where you’ve got a tough market.”

Enjoy did not immediately return a request for comment and updates on its capital-raising efforts.

One of the reasons for the stingier capital markets also spells trouble for Enjoy Technology. Customers have been pulling back on discretionary spending, including on tech products. 

Williams noted that during the pandemic, many consumers pulled forward purchases in consumer electronics as they outfitted their homes and home offices. That may be starting to unwind, if other retailer’s experiences are any signal. ”In a slower consumer environment — I don’t know who really gets spared in it,” Williams said.