Jumia Records $30.9mn Loss in Q1
Africa e-commerce giant, Jumia Technologies AG, announced today that its operating loss moderated in the first quarter of 2023 amidst a revenue slump. The e-commerce company reported that revenue reached $46.3 million in the first quarter of 2023, down 3% on a year-over-year basis, mostly driven by First Party revenue performance.
In the period, First Party revenue was $18.4 million, down 7% on a year-over-year basis, mainly as a result of the scale-back of the grocery subcategory, which was largely undertaken on a first-party basis, the company said in its financial statement.
Meanwhile, Jumia said marketplace revenue reached $27.4 million in the first quarter of 2023, up 4% on a year-over-year basis. Commissions was the fastest growing marketplace revenue stream, it said in the financial statement, increasing by 40% year-over-year.
According to Jumia, this growth was the result of commission take-rate increases implemented in mid-2022. It noted that Marketing & Advertising revenue was stable year-over-year.
Jumia said foreign exchange effects resulted in a significant headwind to growth for this revenue line due to the high weight of the Egyptian Pound in the marketing revenue mix and its year-over-year depreciation by 87% against the US Dollar in the first quarter of 2023.
Value Added Services revenue, which predominantly includes logistics revenue from sellers, and Fulfillment revenue, which includes shipping fees from consumers, decreased by 11% and 21% year over-year, parallel with a volume decline.
“However, we are improving the monetization of our logistics services and the pass-through of our fulfillment costs”.
The ratio of the sum of Fulfillment and Value Added Services revenue over Fulfillment expense increased from 62% in the first quarter of 2022 to a record high of 79% in the first quarter of 2023.
The ecommerce group saw its gross profit at $28.6 million in the first quarter of 2023, up 5% year-over-year or 24%. Gross Profit margin as a percentage of GMV reached 14.4% compared to 10.8% in the first quarter of 2022, as a result of commission take-rate increases implemented mid-2022.
It reported that fulfillment expense amounted to $16.0 million, down 34% year-over-year, in parallel with the decline in orders. Fulfillment expense per Order, excluding JumiaPay app Orders, which do not incur logistics costs, decreased by 20% from $3.1 in the first quarter of 2022 to $2.5 in the first quarter of 2023.
This efficiency improvement reflects the early signs of success of multiple initiatives being implemented across our logistics chain, Jumia said in the report.
These include optimizing the company’s footprint and logistics routes, improving warehousing staff management and productivity, reducing packaging costs and many more.
Sales and Advertising Expense Sales & Advertising expense amounted to $5.8 million in the first quarter of 2023, down 69% year-over-year as Jumia bring more discipline to marketing investments.
Jumia indicates that the company reduced its marketing budgets, but remain committed to driving profitable long-term growth for Jumia.
“This reflects a fundamental change in our approach to growth and marketing. We are moving away from an approach that fuels usage growth with marketing and promotional spend which has historically led to a deterioration of unit economics in phases of growth acceleration, without providing a sustainable foundation to scale the platform.
“Instead, we are now focused on enhancing the fundamentals of our platform and consumer value proposition to support the long-term growth of our business, in a sustainable and cost-effective manner”.
Technology and Content expense reached $11.8 million in the first quarter of 2023, down 9% year-over-year.
“Technology is a core part of our DNA and we remain committed to improving the experience of our consumers and sellers as well as the efficiency of our operations through the continuous roll-out of new products and features.
“In particular, we rolled out an AI-powered recommendation engine at checkout on our food delivery platform. This module aims at increasing order value through the recommendation of frequently bought together items”, Jumia said.
The ecommerce company reported that General & Administrative expense, excluding share-based compensation, reached $25 million in the first quarter of 2023, down 16% year-over-year and 5% on a constant currency basis.
The staff costs component of G&A expense, excluding share-based compensation expense, decreased by 21% year-over-year, as result of the organizational changes undertaken in the fourth quarter of 2022.
“The first quarter of 2023 figures do not yet reflect the full impact of the headcount cuts of the fourth quarter of 2022, as the first quarter of 2023 still included the last months’ salaries of some of the leavers”.
In Q1, Jumia said operating loss was $30.9 million, down 54% year-over-year, as a result of the significant cost decreases over the period. Adjusted EBITDA loss was $27.0 million, decreasing by 51% year-over.
Cash Position
As of March 31, 2023, Jumia said the ecommerce company had a liquidity position of $205.4 million comprised of $86.9 million of cash and cash equivalents and $118.6 million of Term deposits and other financial assets.
It said quarterly cash utilization, defined as the net decrease in cash & cash equivalents adjusted for foreign exchange effects and movements in term deposits and other financial assets, reached $23.5 million.
This is a reduction in cash utilization of approximately 60% compared to both the first and fourth quarters of 2022, the company said in the report.
“We are committed to taking the business to profitability and the first quarter of 2023 results demonstrate very good progress towards this goal. Operating loss decreased by 54% year-over-year to $31 million, its lowest quarterly level in over 4 years.
“Our cost reduction initiatives are clearly bearing fruit, with all operating costs decreasing in the first quarter of 2023, both sequentially and on a year-over-year basis,” commented Francis Dufay, CEO of Jumia.
“We are very encouraged by this progress and are now redoubling our efforts to drive sustainable long-term growth for the business. We are equally focused on both cost efficiency and usage growth. The macroeconomic environment has been challenging over the past few quarters, which negatively impacted our growth trajectory.
“Notwithstanding these temporary headwinds, we have significant growth runway in our markets and are strengthening the fundamentals of our business and consumer value proposition to capture this vast opportunity.”
Quarterly Active Consumers, Orders, and GMV declined by 22%, 26%, and 22% year-over-year respectively. Usage metrics were negatively affected by a combination of factors in the first quarter of 2023.
Jumia said continued macro challenges with high inflation affect consumers’ spending power as well as sellers’ ability to source goods.
“We also faced a challenging operating environment during the quarter in Nigeria with protests related to the withdrawal of high-denomination currency notes and security concerns around the election period in February 2023. As of the date of this release, these disruptions in Nigeria have subsided”.
The company did deliberate product and service portfolio recalibration, moving away from unprofitable categories with limited consumer lifetime value.
“As part of that, we have suspended our first party grocery offering in most countries while we have significantly reduced promotional intensity behind a number of services on the JumiaPay app.
“JumiaPay app services accounted for over 25% of GMV decline and over 40% of Orders decline in the first quarter of 2023. JumiaPay app services, combined with the FMCG category, which includes grocery products, accounted for 55% of the decline of items sold and 34% of GMV decrease during the quarter”◦
Jumia said in its report that foreign exchange effects contributed 15 percentage points to the GMV decrease of 21.6% year-over-year, with 9 out of 10 local currencies depreciating against the US Dollar.
The Egyptian Pound and Ghanaian Cedi depreciated by more than 80% against the US Dollar, while the Nigerian Naira, Kenyan Shilling, and South African Rand depreciated by over 10%.
Notwithstanding these challenges, we believe in our ability to generate sustainable, long-term growth for the business and are working on a comprehensive plan to enhance the fundamentals of our platform.
TPV was $48.6 million, down 31% year-over-year and down 13% on a constant currency basis, with foreign exchange effects being a significant headwind to TPV performance, particularly the 87% depreciation of the Egyptian Pound vs. the US Dollar. #Jumia Records $30.9mn Loss in Q1
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