Today, African e-tailer, Jumia Technologies AG (NYSE: JMIA), announced its financial results for the quarter ended September 30, 2020.
Jumia’s third quarter (Q3) 2020 results packed quite a number of highlights but one of the biggest talking points is perhaps found in the company’s submission that for the first time at Group level, Jumia scored a positive in its gross profit after Fulfillment & Advertising expenses.
As per the figures in the latest quarterly report, Jumia’s gross profit after Fulfillment expense reached EUR 6.6 Mn (USD 7.7 Mn), compared to a loss of EUR 1.7 Mn (USD 2 Mn) in the third quarter of 2019.
In other words, for the first time in the Group’s history, gross profit after expenses moved clear of the red zone, spotting a positive figure that indicates movement in the right direction. The company also states in the report that it broke even at this level in the majority of countries where it has operations in Q3 2020.
Not too long after its historic listing on the New York Stock Exchange (NYSE) in April 2019, things began to go somewhat south for Jumia following a short-sell attack led by Citron Research.
In the months that followed, allegations of some internal improprieties sent Jumia’s stock plummeting as lawsuits were filed against the e-tailer. It was a PR nightmare that sent Jumia near the bottom, but the company has remained focused on weathering the storm, even though it meant shrinking in size.
To steady the ship, Jumia closed shop in three African markets, gave up some of the business verticals in its portfolio, reorganised its core e-commerce business, cut down operational/marketing expenses, and rolled out renewed efforts in new areas like payments and logistics.
This was all part of its “business mix rebalancing” effort aimed at quenching the burn and aggressively steering Jumia towards profitability.
In the months since adopting those drastic and somewhat austere measures, Jumia seems to have made progress in cutting down losses that have soared towards the billion-dollar threshold, and the company has now amassed profits in back-to-back quarters this year.
As per the latest report, gross profit reached EUR 23.2 Mn (USD 27.3 Mn), a year-over-year increase of 22 percent. Sales/advertising expense was EUR 6.2 Mn (USD 7.3 Mn), the lowest quarterly amount since 2017 and a year-over-year decrease of 55 percent.
Jumia claims it has continued to increase marketing efficiency as sales and advertising expenses per order decreased by 53 percent from approximately EUR 2.00 (USD 2.36) in the third quarter of 2019 to EUR 0.90 (USD 1.06) in the third quarter of 2020.
In the same vein, Jumia’s operating loss reached a three-year low of EUR 28.0 Mn (USD 33.04 Mn) decreasing by 49 percent year-over-year.
The effects of the business mix rebalancing, which signals a more conservative approach, manifested in Jumia’s gross merchandise value (GMV) which shrunk to EUR 187.3 Mn (USD 221.1 Mn), down 28 percent year-over-year.
Notwithstanding, annual active consumers reached 6.7 million in Q3 2020, up 23 percent year-over-year. However, orders fell to 6.6 million, down 5 percent year-over-year on the back of a 20 percent decrease in digital services transactions on the JumiaPay app, while orders on the rest of the platform were stable.
Jumia’s payment platform, JumiaPay, continued its stellar growth recording a total payment value (TPV) of EUR 48.0 Mn (USD 56.6 Mn), a year-over-year increase of 50 percent.
Commenting on the Q3 2020 results, Jeremy Hodara and Sacha Poignonnec, Co-Chief Executive Officers of Jumia, are quoted as follows;
“We are making significant progress on our path to profitability with Adjusted EBITDA loss in the third quarter of 2020 decreasing by 50 percent year-over-year.”
As the quotes read further, “The significant progress achieved was mostly attributable to the thorough work we have done on the fundamentals of our business, with limited support from external factors such as COVID-19.”
It was also mentioned that the business mix rebalancing initiated late last year has increased Jumia’s exposure to everyday product categories and, combined with enhanced promotional discipline, supported unit economics.
Additionally, both co-CEOs claim that the company has made multiple enhancements across its logistics and marketing operations that led to a decrease in fulfillment and marketing expenses for the third quarter of 2020.