Africa’s unicorn, Jumia, records narrowed losses in Q4 2022 after enforcing cost-saving strategy

Godfrey Elimian
…projects that it will reduce its losses even further in 2023 to a range of $100 -$120 million.
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On Thursday, the E-commerce platform, Jumia, said that its cost savings strategy has helped it reduce fourth-quarter losses by 30% from a year earlier, with a further sharp drop expected this year.

Despite making revenues of $66 million for Q4, the company recorded a full-year loss of $207 million and a Q4 loss of $49.2 million in the earnings report released for Q4 2022 and the full year 2022. It projects that it will reduce losses even further in 2023 to $100 -$120 million.

In addition to the decreased losses, the Q4 2022 metrics for order volume and gross merchandise volume (GMV) decreased to 9.9 million and $283.1 million, respectively. The total volume of transactions processed by Jumia Pay, which has been the company’s crown jewel in recent years, also decreased.

Jumia’s chief executive Francis Dufay stated that the company anticipates a significant decrease in its annual adjusted EBITDA loss to $100-120 million in 2023 from $207 million in 2022 due to the positive indicators that its cost-cutting strategies are beginning to pay off.

African online retailer Jumia's Q4 losses narrow on cost savings

“We expect these headcount reductions to allow us to save over 30% in monthly staff costs starting from March 2023, as compared to the October 2022 staff cost baseline,” Jumia said.

Additionally, The African Unicorn reported a $49.2 million adjusted loss before interest, tax, depreciation, and amortization for the three months ended December 31, down from $70 million in the corresponding 2021 period. It also significantly reduced its sales and advertising expenditure by 41% year-on-year.

The first Africa-focused tech start-up to list on the New York Stock Exchange cut more than 900 jobs in the fourth quarter and also significantly reduced its presence in Dubai, relocating most of its remaining staff to its African offices.

Recall that we recently reported that its biggest investor, Baillie Gifford, an Edinburgh-based wealth management company long known for its affinity for pre-IPO internet businesses, has decreased its stake in the company.

Read also: Jumia’s biggest investor cuts stake by 0.67%

Jumia’s cost-saving strategies

For Jumia, profitability is non-negotiable, and the e-commerce giant is willing to cut “projects and ventures that do not meet such criteria”. First, the company discontinued first-party grocery offerings in selected markets due to poor unit economics.

African online retailer Jumia's Q4 losses narrow on cost savings

Jumia also said it would scale back on product categories with inefficient delivery economics (grocery in selected geographies), renegotiate delivery rates with relevant third-party logistics partners, and enhance warehouse productivity.

The company equally hinted at axing staff costs by streamlining its management structure, which would reduce the size of its Dubai office. Also, the company’s senior leadership and decision centres will be relocated closer to its consumers and sellers in Africa.

“We will bring more focus to the business, directing our efforts and resources to projects and activities that deliver tangible value to our consumers, sellers, and broader ecosystem participants. We are also enforcing tighter cost discipline and driving efficiencies across the full structure while enhancing the fundamentals of our core e-commerce business to drive usage growth,” Francis Dufay, CEO of Jumia, said in a statement.

Although the e-commerce giant Jumia recorded substantial growth in revenue and gross profit in the third quarter of 2022, per the company’s financial earnings report. A major proponent of the revenue gains was a result of the drop in these operating losses, brought about by a change in strategy.

According to the numbers, the company reported $50.5 million in revenue in Q3 2022, a 6% growth when compared to the $47.6 million recorded in the previous quarter (Q2).

African online retailer Jumia's Q4 losses narrow on cost savings

That figure represented an 18.4% increase from the $42.7 million reported in the same period last year. 

The company also reported a 33% drop in operating losses in Q3 2022, just as the company’s gross profit increased by 29% compared to 2021. In Q2, its gross profit reached $30.4 million, up 14% year-over-year, which was the fastest growth rate in the past five quarters.

Another major strategy that helped the e-commerce giant was the unexpected change in the company’s leadership. Until his appointment, Francis Dufay was the executive vice president for Jumia Africa, overseeing its entire operation on the continent. He was appointed CEO, replacing Jumia co-founders Jeremy Hodara and Sacha Poignonnec, who stepped down.

This year, while group revenue rose 7.1% to $66.5 million in the quarter, its active marketplace consumers fell by 15% to 3.2 million as rising inflation squeezed consumer spending while affecting sellers’ ability to secure supply.

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