Jumia managed to cut its operational losses in Q4 achieving profitability still remains a challenge

Jumia, a leading African e-commerce firm, managed to curtail its operating losses to $4.5 million by Q4 in 2023, owing to several significant strategic adjustments. Despite these changes, the company’s profitability is still under scrutiny. Amid these adjustments, Jumia took the challenging decision to discontinue Jumia Food due to the severe macroeconomic conditions impacting the food delivery industry.

The company also reduced the number of staff members and shifted its focus away from low-ticket items. But, with a decrease of 500,000 active customers in Q4 compared to the previous quarter, reaching a profitable status remained a challenging pursuit for the company.

Under the leadership of CEO Francis Dufay who assumed his role in February 2023, Jumia has displayed commendable cost discipline and improved cash management.

The tech firm stated: “We believe that Jumia is now a much leaner, more agile and more focused company. We have reevaluated our portfolio and made tough decisions regarding business activities that did not bring the right value.”

Sales and advertising expenditures were cut down to $6.2 million, as the company minimized advertising on customer incentives such as vouchers and free shipping. This represented a significant 62.8% drop in advertising expenses compared to Q3 of 2022. General and administrative spending also saw a decline, coming down to $12.3 million.

Despite these measures, the company’s Gross Merchandise Value (GMV), indicating the value of all goods purchased via its platform, dropped to $233.3 million. Jumia attributed this fall to currency devaluation across its operating markets.

The tech firm disclosed in its financial report that, “Eight out of ten local currencies in our countries of operation depreciated against the US Dollar in 2023, compared to 2022.”

Such currency depreciations coupled with high inflation rates impaired the purchasing power of local customers. Despite this backdrop, Jumia noted growth in commissions driven by corporate sales to regional and local retailers and distributors in certain markets.

According to Dufay, who spoke during the earnings call following the release of the results: “We are seeing signs of stability and growth in other markets.” And as for liquidity, Jumia reported having a cash balance of $35.5 million and a liquidity position of $120.6 million.

A silver lining in the company’s report is the rising number of JumiaPay transactions, which surged by 41% year-over-year to reach $3 million in the last quarter of 2023. In light of this, Dufay disclosed potential plans to introduce JumiaPay in Nigeria, with the expectation of achieving cashless transactions for at least 50% of transactions by the end of 2024.