Jumia’s new CEO actions and 20% job cuts result in 22% Q4 gross profit increase

African eCommerce giant, Jumia, posted a 22% gross profit in last quarter operations even though it still reported a loss of $49.8 million. This loss is a decrease by 41% year-over-year compared to last year operating loss figure of $84.7 million.

The report shows a positive change in the fortunes of the company as it implements its turnaround plan for the company under the new CEO, Francis Dufay who was appointed acting CEO in November 2022 with the resignation of co-CEOs, Sacha Poignonnec and Jeremy Hodara.

According to the company in its Q4 2022 report released yesterday,

“The Company is delivering on its strategy to reduce losses and accelerate progress towards profitability with a major focus on enhanced cost discipline as well as accelerating monetization. Jumia’s new leadership took swift action to streamline the organizational structure which will help drive meaningful G&A savings in 2023.”

“Usage growth dynamics in the fourth quarter of 2022 were impacted by macro challenges in a number of countries with high inflation and also supply disruption. Management view these challenges as temporary in nature and are placing focus on executing even faster on cost efficiency projects.”

Francis Dufay listed some of the strategies that the company implemented in its turnaround exercise.

• The undertaking of significant headcount reductions, resulting in over 900 position terminations, corresponding to a 20% headcount reduction. This will bring about a cost savings of over 30% in monthly staff costs starting from March 2023, as compared to the October 2022 staff cost baseline. The implementation of these organizational changes resulted in $3.7 million in one-off restructuring costs booked in the fourth quarter of 2022.
• Increased focus on driving marketing efficiencies, leading to a significant reduction in the Sales & Advertising expense which decreased by 41% year-over-year in the fourth quarter of 2022
• The completion of some business exits:
  • scaling back on first party grocery in Algeria, Ghana, Senegal and Tunisia;
  • discontinuation of Jumia Prime, which had an immaterial contribution to GMV and Revenue
  • discontinuation of food delivery operations in Egypt, Ghana and Senegal, and
  • discontinuation of Jumia Prime

Jumia says it remains committed to reducing its losses and accelerating its progress towards profitability. It also expects its continued cost discipline to drive efficiencies throughout 2023.