By Tinashe M Tmukogo:

1. Jumia once called the "Amazon of Africa" just released their financial results for Q2 & they are not looking good. The former unicorn, has stopped growing & is facing challenges that could bring down one of the most hyped start-ups from Africa.

Analysis + V11s below 👇🏾 #Jumia

2. The first concern is the -15.4% decrease in revenue combined with a operating loss of $23m. Usually a company has a revenue or profit problem, Jumia has both. That's like a football team that can't score goals and also can't defend.

3. Jumia has always made huge losses. What saved it in the past was the African growth story. Even in their 2019 IPO prospectus the word "growth" appeared over 100 times e.g. in one section alone Jumia mentions growth 10 times (yellow highlights).

4. But now Jumia is not growing and the only "good news" is that it is losing less money than before. However, this improvement is driven only by brutal cost cutting measures with expenses down -47% 🤯.

Jumia's most tricky problem however is going to be cash...

5. Jumia has $166m in cash, which, if the Q2 cash utilization of $38m continues, will last ~13 months. While this doesn't always mean disaster (Jumia has been there before), there is a significant difference this time that changes everything - the stock price... 🆘

6. In 2020, Jumia was low on cash. Fortunately its stock was flying so they issued shares & raised $231m at $30.51 per share. They did this again a few months later in 2021, and raised $341m at $38.90 per share. Their stock had helped them raise $571m in cash in a few months.

7. Now however, Jumia's stock price has crashed from $38.90 to $3.05 (+90% drop). The shares issued in 2020-21 that raised $571m, would today raise less than $57m which wouldn't last 6 months. Also investors who had bought shares made big losses & so less likely to be interested.

8. Jumia could theoretically try raise cash from debt financing e.g. from banks. However even they mention that this is unlikely due to history of losses, negative cashflows etc.

So with both issuing new shares and debt financing being challenging what options does Jumia have?

9. Cut costs and try stay alive for as long as possible. This is exactly what Jumia is trying to do. Jumia has been incredibly aggressive on cost reductions e.g Sales & Advertising expenses down 74% 🤯 compared to last year.

10. Jumia is so focused on cost reduction they have even adjusted their EBITDA guidance to indicate they will save ~$10m more than planned.

I also think was done to show some element of progress to investors amidst all the bad news.

But will all these measures work?

11. Ironically I wrote about cost cutting this week in another thread and the principle still applies. Cost cutting cash only take you so far. Ultimatelty you need to deal with the underlying business issues.

This is where my concern is...

12. Management is taking the right steps but may have inherited a fundamentally flawed business. I reconstructed a Quarterly P&L using historic best performance for each line. This is represents the perfect case scenario but even with that Jumia is still loss making.

13. This leads me to thinking that Jumia might be structurally unprofitable, like a business selling $100 bills for $50. It will grow and have lots of demand, but you can never make it profitable. At best, you can decrease the losses - which seems to be what Jumia is doing now.

14. The key lesson here is that, although growth is crucial, especially for startups, it should not be assumed that growth and scale will automatically lead to profitability.

If you can't deliver on profit you will eventually have to pay for it.

15. Thanks for reading. If you found this insightful, please Like/Retweet the first tweet below and follow me
@tmukogo
for more.

I write on the finance & strategy behind the most important companies in Africa and the rest of the World.

PS: Not Financial Advice

https://twitter.com/tmukogo/status/1692191844262883719?s=20

Investors react negatively after Jumia’s tepid Q2 results

Jumia, the "Amazon of Africa", is facing a reclining liquidity position amid losses and unprofitability Image source: Textmaster

Investors baulked after Jumia’s Q2 results showed the company lost 1 million active customers despite reporting its lowest loss in four years.

After Jumia shared its financial results for the second quarter of 2023, investors reacted negatively, causing its shares to close at a 17% low on Tuesday. Jumia reported a 15% decline in revenue, with other metrics also declining. Gross Merchandise Value (GMV), number of orders and active customers declined compared to Q2 2022. Jumia also lost 1 million active customers between Q2 2022 and Q2 2023.

One big positive in Jumia’s report was that it reduced its losses to the lowest in four years. Reducing its losses is significant if the company becomes profitable. Yet there are many other worries. Its lower operational losses came from a massive reduction in sales and advertising spend. A significant reduction in its workforce also reduced its General and administrative expenses. While lowering costs is one part of the lever, increasing revenue is the second, and this is where Jumia fell short in Q2.

Macroeconomic headwinds across many of its African markets have made business difficult. Inflation in key markets like Nigeria, Ghana and Egypt and currency devaluation continues to hinder growth; it contributed 14 basis points to the reduction in the company’s GMV. The biggest challenge remains the slow growth of these economies and the decline of the purchasing power of citizens. It remains to be seen if Jumia can be profitable despite the economic terrain.

One thing is clear: Jumia is throwing the kitchen sink at it in search of revenue growth. It has done an about-face on its strategy of focusing on groceries and everyday items. Jumia also insinuated that the theory that selling groceries and everyday items would improve stickiness may not be accurate. “We continue to recalibrate our product and service portfolio, moving away from the most profitable categories with limited consumer lifetime value,” said the company’s CEO, Francis Dufay.

Critically, one effect of reduced consumer purchasing power is that people cut down on non-essentials or switch to cheaper alternatives. Even if Jumia offers groceries, it may not have the more affordable alternatives many customers can find offline.

Jumia is betting on JumiaPay, citing “strong development potential to process payments on behalf of third-party merchants.” Dufay added, “In line with our objective of making JumiaPay an even more effective e-commerce enabler, we are significantly increasing the penetration of JumiaPay in both our physical goods and food delivery platforms.”

https://techcabal.com/2023/08/16/jumia-shares-fall-on-q2-results/

Interesting expose.

ChatterHouse:


All the business in Nigeria are dieing



They only business that pays now is selling otapiapia consumables.


Nigeria is a failed state

Fixed.

MichaelSokoto:
emilokanomics effect!

Akasammyoka:
The old shall die and the young shall grow. Young online marketers are busting left and right. The competition is getting intense.

Jumia should up their retail sales and franchise by creating promo brand ambassadors.

Akasammyoka:
That still won't aid anything, jumia as a whole need total overhaul.

Really? Lolz please are you an insider? Why do you infere it needs overhauling ?


Wittyness

All the business in Nigeria are dieing



They only business that pays now is selling otapiapia



Nigeria is a failed state

emilokanomics effect!

The last time Nigerian economy did well was 2015. Just before APC

And they say they are a progressive party. But they've only succeeded in making us poorer.

Anyways
Funniest video you'll see today

https://youtube.com/shorts/qGDXoykKIzc?feature=share

Every business has its ups and down, and if there's no proper management anything bad can happen.

Hmm 419 too much on Jumia now.
Boys dey BOMB there steady.. same boys shouting new Nigeria po ssible but dey chase investors.

BarrElChapo:


How do you mean when you use the term "bomb"

u whining me on "BOMB" meaning ? @swalomiir come and Tutor us all o
BOMB means internet scammer dey fish clients.

The old shall die and the young shall grow. Young online marketers are busting left and right. The competition is getting intense.

WhatsApp female CEOs in Lekki and different red light district areas have hijacked online retail business from Jumia.

Nothing last forever.

Thumbs up to all female CEOs.

People are not buying

As we were thought in economics, "Supply is generally considered to slope upward: as the price rises, suppliers are willing to produce more. Demand is generally considered to slope downward: at higher prices, consumers buy less".

The Shege is going round.

Nigeria business terrain isn't an easy place.

You come up with a business idea, and boom...everyone rush and follow up. Unfortunately, they can even do it better than you do.

Jumia paved the way for online market place in Nigeria, but as it stands, they are being poached big time.

Anything Ebola touches become paralyzed.

What Has Tinubu Gotten Right Since He Entered May 29 ?

Tinubu is here to finish what is left of Nigeria.

He has taken our Economy down the abyss.

Investors are running away.

Over 90% of Generator owners can no longer afford fuel.

He's busy saving trillions off the sufferings of Nigerians, so that his cronies would have enough money to loot.

Instead of tackling all these challenges which he can never be able to do in the next 100 years,
He's looking for War up and down.

Ronu ooh.

Bad economy policies from a cocaine addict parading himself as president. Things are getting worse. APC as a party in the central needs to leave our national life. Devil is their chairman in disguise. Everything about them is devilish.

No agbodo muncher should quote me if you don't want to be unfortunate.

And some people are at the top sharing 2 million naira each just for holiday

Na naija economy, everybody dey Para now.

Make them park well jor

Jumia refused to understand that they were excelling because of the AD's on their website posted by various vendors who sell on the platform.

By the time Emilokan is through with Nigeria
I no even dey pity anybody again,agbadorians,obidents,atikulators etc
All of una go see nweeeee

Na statistics we go chop?

So said a very famous man

Naija

E je ki Omo wa se
Se Omo wa ti se dada?
Meaning
Let our child do it
Hope our child is doing it well?
Mind u I'm Yoruba ooo

Ordering online is just a flex because you get to sit down at home while your items are brought to you.

But, now that things are cost, i will just do the more than 200 meter walk first then scout every market to buy my items at affordable prices.

Like and share if you believe obi is coming to reclaim our mandate

ChatterHouse:


All the business in Nigeria are dieing



They only business that pays now is selling otapiapia



Nigeria is a failed state

I think It is narcotics. Was in a neighborhood and saw kids as young as 14 buying drugs, It makes me to wonder if they are going through depression too

.this one na buhari oh. Not just tinubu. It got really bad during buhari second term.

Jumia couldn’t maintain it office rent in most states. They now operate from dilapidated buildings. From a delivery car to delivery with motorcycle.

Even konga has increased price for shipping to about 200%. Imagine ordering something of 4k and paying 3.5k for delivery. I stop using konga and other people as well. And i see them folding up soon.

Hope jumia too won't leave with the inflation