5 Spicy Takeaways From Jumia’s First Full-Year Financials Since The NYSE IPO
Yesterday, Africa-focused e-tailer, Jumia, released its fourth-quarter and first full-year results since going public via a historic Initial Public Offering (IPO) on the New York Stock Exchange (NYSE) that saw it soar high before being brought back down to earth.
And in keeping with its apparent quarter-on-quarter trends, Jumia’s latest results were kind of a mixed bag.
While expected upticks were recorded in its active annual customer base and number of orders, there were declines in certain other respects as the company piled on some more losses despite recording a bright spot by scoring a small gross profit, though the company is still far from overall profitability and the tiny gross profit is dwarfed considerably by the fact that the e-tailer has burned through as much as USD 1.5 Bn since its founding in 2012.
In any case, here are some of the most interesting bits extracted from Jumia’s latest financials.
- The Coronavirus Outbreak Could Stifle Jumia’s Growth In 2020
The online sales company, with an operations center in China, anticipates some negative impact on its growth projections for 2020 due to the coronavirus outbreak that has already claimed over 2,500 lives in China alone.
It appears many of the sellers on Jumia’s marketplace are facing challenges with getting some of the products which they source from China due to the viral outbreak, and by extension, this could impact product availability and pricing.
“We are starting to face some challenges to fulfill our cross border sales,” Jumia’s CEO, Sacha Poignonnec, said during the earnings call yesterday.
“Many of the sellers in our marketplace are starting to face procurement issues so this can affect both product availability and prices.”
- Jumia Reached A Tiny Gross Profit Of EUR 1 Mn
Having been stuck in the red all these years, it is welcome news to learn that Jumia got into the black somewhat, however small. Baby steps, huh?
Considering its gross profit versus fulfillment expenses, Jumia made EUR 1 Mn (USD 1.08 Mn). A paltry sum obviously, but one that Poignonnec says the company is taking as a good sign.
The CEO pointed to Jumia’s ability in Q4 to reach positive gross-profit over fulfillment expenses as a sign it could eventually get into the black overall, especially as fulfillment costs have been historically high for Jumia as an online-retailer in Africa.
The small gross profit versus fulfillment expenses that Jumia recorded may also have something to do with the fact that the company ended its business in three African markets towards the end of last year and scaled back on e-commerce somewhat in other markets where it still operates.
- The E-tailer’s Sales Dropped As Phones/Consumer Electronics Sales Dipped By 20 Percent
Jumia’s 2019 Gross Merchandise Value (GMV) — the total amount of goods sold over the period — shrunk by 3 percent to EUR 301 Mn (USD 327.4 Mn) in the fourth-quarter.
The contraction in sales, which Poignonnec put down to “business mix rebalancing,” was primarily caused by a 20 percent drop in phone sales which had been a big driver of Jumia’s early success but now appears to be suffering a decline due to the fact that phone sales are a competitive big-ticket item market.
Bearing that in mind, Jumia will continue its push for profitability by taking up fast-moving consumer goods (FMCG), fashion, beauty, and personal care as well as digital services to encourage repeat purchase and consumer lifetime value.
- Jumia’s Revenues Surged, But So Did Losses
By now, the overall pattern of growing revenues and customers year-on-year is not lost on anyone who is familiar with Jumia. But oddly, it seems those two metrics keep rising only if Jumia takes more losses.
As the latest results yet again showed, Jumia posted 2019 revenues of EUR 160 Mn (USD 174 Mn), representing growth of 24 percent over 2018. In addition, in Q4 2019, the company increased its annual active customer base by 54 percent, to 6.1 million, from 4.0 million for the same period last year.
And not to be left out, the losses did a climb of their own. In the fourth quarter, operating losses expanded by 15 percent to EUR 61.1 Mn (USD 66.5 Mn) year-on-year while full-year operating losses widened by 34 percent to EUR 227.9 Mn (USD 248 Mn).
- JumiaPay Keeps Giving Hope
When Jumia released its Q3 2019 financials, the emergence of JumiaPay as, perhaps, the saving grace, was hinted at.
JumiaPay is a digital finance product that is being primed for Jumia’s fintech pivot which would see the company offer its JumiaPay service as a standalone service for use on other platforms.
After being launched as a payment option on its platform, transaction volume and value has grown rapidly over the past year on the service which is being used in six African countries currently.
Per the just-announced results, total payment volume on JumiaPay increased 57 percent year-over-year to EUR 45.6 Mn (USD 49.6 Mn) in 2019 and JumiaPay was used to process payments for 29 percent of Jumia e-commerce orders.
After the report by Andrew Left’s Citron Research hit Jumia hard last year, the company’s share price has never quite recovered from the crash. At a time, Jumia shares were trading at more than two-times the USD 14.50 opening share price post IPO and even peaked at USD 49.00. These days, the figure is stuck around single-digits.
And the latest earning’s call didn’t help matters as Jumia’s share price nosedived in the wake of the publicised financials, dipping by 28 percent at the close of trading yesterday.
Featured Image Courtesy: Bloomberg
