Jumia reaches lowest losses in four years under new management

Jumia reaches lowest losses in four years under new management

Q1 2023 marks the first quarter Jumia’s new management implemented its strategy after riding out the blueprint of previous management in Q4 2022. The result? Jumia saw its losses decrease significantly: adjusted EBITDA loss dropped 51% year-over-year to $27 million, on track to meet the company’s end-of-year target of $100-120 million in adjusted losses. Similarly, operating loss was down 54% from Q1 2022 to $30.9 million per the company’s just-released financials.

The article discusses Jumia's financial performance in the first quarter of 2023 and the company's efforts to reduce losses and streamline operations. Jumia, an e-commerce giant operating in several African markets, experienced a significant decrease in losses, with adjusted EBITDA loss dropping by 51% year-over-year to $27 million. Operating loss also decreased by 54% compared to the same period in 2022.

The company's cost-cutting measures, including a 20% reduction in headcount, played a role in reducing losses. However, the full impact of the headcount cuts was not reflected in the General and Administrative expenses for Q1 2023, as the salaries of some leavers were still included. Jumia plans to further reduce G&A costs by up to $28 million by the end of the year, which may involve additional layoffs.

Expenses in fulfillment, sales and advertising, and technology also decreased, contributing to cost savings. Jumia implemented measures such as negotiating with suppliers, optimizing truck routes, and reducing marketing spend. The company aims to build a leaner cost structure with improved efficiency.

Despite the cost-cutting efforts, Jumia experienced a decline in quarterly active consumers by 22%, leading to a decrease in orders and Gross Merchandise Volume (GMV) by 26% and 22% respectively. Various factors contributed to this decline, including macroeconomic challenges, inflation impacting consumer spending power, difficulties in sourcing goods for sellers, and currency devaluation.

Jumia intentionally recalibrated its product and service portfolio in Q4 2023, suspending certain operations in key markets. The company also reduced promotional intensity in JumiaPay, its fintech arm, resulting in a decline in Total Payment Volume (TPV) and transaction volume. JumiaPay accounted for a significant portion of the decline in items sold and GMV.

Jumia is shifting to a new growth model focused on improving supply and assortment relevance, enhancing seller management tools and processes, and targeting underserved consumer pools in inner cities and rural areas. The company has been expanding its logistics routes and pickup stations in smaller cities and aims to attract more loyal customers through marketing activations in various markets.

Although key customer metrics declined, Jumia's revenues remained relatively flat, decreasing by 3% to $46.3 million. This was partly due to commission take rate increases implemented by the company. Jumia ended the quarter with a liquidity position of $205.4 million.

Overall, Jumia is working towards achieving profitability by implementing cost-saving measures, refining its business model, and targeting growth opportunities in underserved markets.

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