E-commerce giant Jumia has hit a milestone in Q3 2023 with an adjusted EBITDA loss of $15 million, marking a substantial improvement compared to Q3 2022’s loss of $32 million. This drastic 67% year-over-year drop reflects the company’s strategic pivot towards more robust financial fundamentals.
The reduced loss signifies a deliberate move towards increased operational efficiency and profitability.
Jumia’s strategic actions led to a noteworthy decrease in liquidity position, reduced by $19 million in Q3 2023, a 71% year-over-year decrease compared to the previous year’s $66 million reduction. Moreover, sales and advertising expenses fell by 74% year-over-year, down to $4.3 million in Q3 2023, showcasing the company’s commitment to disciplined marketing investments.
Amidst this financial restructuring, Jumia faced substantial declines in various metrics. There’s an 11% year-over-year drop in revenue, a decline in quarterly active customers by 24.3%, and a decrease in orders by 23%. These figures mirror deliberate actions by Jumia to recalibrate its product portfolio, including suspending certain services in markets deemed economically challenging.
Macro factors such as high inflation and import restrictions across its footprint contribute significantly to the company’s declining performance. Moreover, seasonal impacts, especially during Q3, have led to decreased usage and order volumes compared to the previous quarter.
Read similar story: Africa’s unicorn, Jumia, records narrowed losses in Q4 2022 after enforcing cost-saving strategy
Notable increase in Gross Merchandise Value for Jumia
A notable reduction in usage, approximately 100,000 from Q2 to Q3 2023, was attributed to seasonal patterns impacting household budgets during Q3, including long holidays and back-to-school expenditures. This trend affected core categories like electronics, home and living, fashion, and beauty.
Despite these challenges, CEO Francis Dufay highlights a positive growth trend in physical goods GMV across five countries, demonstrating a 10% increase on a constant currency basis.
Dufay highlighted a significant positive: an 11% increase in orders from Q2 to Q3 2023, largely attributed to promotional activities in digital categories such as airtime. Notably, physical goods orders remained relatively stable, experiencing only a 1% decline quarter-over-quarter.
Dufay’s emphasis on GMV growth for physical goods in five countries echoes the company’s strategic focus on core business segments. He pointed out growth in Ghana, Uganda, and Senegal and hinted at positive growth in two undisclosed countries. These countries collectively contribute 49% of Jumia’s physical goods GMV.
“The news this quarter is that we’re still making significant progress on profitability and cash preservation. That’s very important, seeing the impact of our growth strategy because we now have an evident and tangible impact across countries that we can share,”
…The fact that we can drive growth again in five countries with much more efficient economics is welcome proof that our strategy is working and gives us a lot of confidence for the other countries to follow the same path.”
Francis Dufay, Jumia’s CEO
Core businesses and Partnerships
Despite a year-over-year decline in GMV for physical goods by 17% in actual dollars, there was a 10% increase on a constant currency basis. Efforts in core categories like phones, electronics, home living, fashion, and beauty drove an improvement in average order value and repurchase rates, indicating a strategic shift towards sustainable growth.
Jumia’s partnership with Starlink and a focus on becoming a preferred distributor for international brands indicate a strategic move towards product diversification and enhancing market offerings, particularly in Africa.
With revised guidance for adjusted EBITDA losses between $80-90 million, a 57% to 61% reduction year-over-year if achieved, investor confidence surged, driving a 7.5% increase in Jumia’s stock. This revised outlook signifies a potential recovery and aligns with the company’s trajectory towards a more financially sustainable model.
Jumia’s current initiatives to balance growth with profitability and its strategic partnerships underscore a transitional phase aiming for resilience and long-term sustainability in the competitive e-commerce landscape.
Read also: Jumia partners with France’s Leroy Merlin to serve smaller African cities
Technext Newsletter
Get the best of Africa’s daily tech to your inbox – first thing every morning.
Join the community now!
