Two reports explain Jumia’s last quarter:
First Report
“Although JMIA has done a stellar job shrinking EBITDA loss in Q2, there are a few very worrisome metrics in this Earnings Call Presentation. Orders are down 37% compared to Q2 2022, and active customers are down 28%. Those are big drops!
It is likely the large drops in order volume and active customers resulted from JMIA’s massive slash to sales and marketing efforts. One slide showed sales and marketing expenses dropping to an insignificant portion of overall SG&A. Sales and marketing cost per order dropped from $2.20 per order to $.90 per order.
Letting the business shrink down to a profitable core might be the best bet for survival. JMIA is doing everything possible to bring EBITDA losses down or even to a green number, but despite the company’s efforts, EBITDA is still negative. A struggle for survival for sure.”
Second Report
“Notable declines in fundamentals caused investors to bail from Jumia Technologies stock on Tuesday. Following its release of quarterly results, the online retailer’s shares fell by more than 17% in price. That was far steeper than the 1.2% drop of the bellwether S&P 500 index.
In its second quarter, Jumia reported revenue of $48.5 million, which was down 15% from the same period of 2022. Gross merchandise value (GMV) fell at a steeper rate, declining at a 25% clip to $202 million. At least the retailer managed to mop up some of the red ink; its comprehensive net loss was $38.1 million against the nearly $71 million shortfall in the year-ago quarter.
In its earnings release, Jumia placed the blame for its declines on the broader macroeconomy. It quoted CEO Francis Dufay as saying that “Usage performance continued to be affected by the difficult operating environment with record levels of inflation impacting consumers’ spend as well as sellers’ ability to source goods.”
Jumia plans to face this challenge by making “fundamental enhancements” to its online platform. It aims to improve its supply and its pricing while becoming a more convenient option for the site’s users and merchants.”
Conclusion: B2C ecommerce is extremely challenging in Nigeria. From the CEO of the company:
“We continue to deliver strongly on our overriding objective of loss reduction and progress towards profitability. In the second quarter of 2023, both Adjusted EBITDA and Operating losses decreased by 66% year-over-year, reaching the lowest loss levels in over 4 years.
“Considering this strong progress, we are updating our Adjusted EBITDA loss guidance for the full year 2023 to $90-100 million, compared to $100-120 million previously.
“We are navigating challenging macro conditions with discipline and focus, doubling down on our efficiency efforts. Compared to the second quarter of 2022, FulfillmentSales & Advertising expenses were down 50% and 74%, respectively.
“We are also starting to reap the benefits of our actions on overhead costs with G&A excluding share-based compensation decreasing by a third year-over-year, reaching a 4-year low at $17.7 million.”
“Usage performance continued to be affected by the difficult operating environment with record levels of inflation impacting consumers’ spend as well as sellers’ ability to source goods. In this context, we continue making fundamental enhancements to our platform to secure better supply and pricing while offering a more convenient experience to consumers and sellers.
“We remain confident in the long-term growth potential of our markets and our ability to capture this opportunity in a profitable manner,” he said.
Nigeria lost one million active customers in a year, dropping from 3.4 million recorded in Q2 2022 to 2.4 million in Q2 2023.
