Jumia posts revenue and order gains, but compounding losses drag its stock lower

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Pan-African e-commerce company Jumia released its third quarter financial performance Today, details of a mix of expected and surprising results,

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When Nerdshala discussed the company’s Q2 2020 financials, Jumia had a market cap of a little over $2.1 billion, based on a price of $22 per share. Since then, Jumia has lost value, trading at just $17.52 per share before the opening bell today. Let’s talk about what the company revealed, and how its new results are affecting its value.

Jumia’s third quarter

Before we dive into Jumia’s third quarter results, remember that Jumia in its report changed the default currency from the euro to the US dollar in Q2 2021; According to the company, it will remain like this in the near future,

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Jumia Q3 Financial highlights “accelerating usage growth” as its main theme, revealing impressive percentage barriers to usage KPIs – orders, annual active customers and gross trading volume (GMV),

Orders placed on Jumia reached an all-time high of 8.5 million, representing a 28% year-over-year increase. Co-CEOs Jeremy Hodara and Sacha Poignonek Say This Is the Fastest Growth saw by Jumia over the past seven quarters. In Q2 2021, for context, the number of orders placed on the platform totaled 7.6 million.

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The pan-African e-commerce company saw most of its orders from fast-moving consumer goods (FMCGs) and food deliveries. According to Jumia, the former category saw its “highest volume numbers ever”, while the latter posted its highest quarterly volume with over 2 million orders.

Annual active customers grew 8.1% year-on-year to 7.3 million from Q3 2020, the report said. Gross merchandise value (GMV) – the total amount of goods sold in the quarter – increased 8.1% from the second quarter of 2021 to $238 million. These numbers stood at 7 million and $223.5 million in the second quarter of 2021.

The co-CEO says his company’s growth acceleration strategy, which was adopted at the end of the second quarter of 2021, is behind improving results for its three use KPIs. Jumia also said it made sales and stakes in advertising and technology arms to “support consumer acquisition and retention”.,

Another key factor in its quarterly performance was the expansion of its grocery range within ‘everyday products’ to cover an estimated 15,000-20,000 SKUs, the company said., To execute this, Jumia had to switch from a marketplace model to a retail model for FMCG brands, which contribute a large part to the growth of the platform. To meet the growing demand, Jumia also launched more dark stores.

Jumiapay Diversification

Jumia — with online goods and services verticals in 11 African countries — reported 8.5% third-quarter revenue growth of $39.3 million to $42.7 million, beating the consensus of $40.2 million.

In Q2 2021, the falling GMV of Jumia resulted in a drop in total payment volume (TPV) at payments arm JumiaPay. In the third quarter, rising GMV led to increased usage, increasing the platform’s TPV 15% year-over-year to $64.5 million.

JumiaPay transactions reach 3 million, up 34% year-on-year. Jumia says it has the fastest transaction growth rate in the last five quarters, with volume growth especially in areas like food delivery fueling the growth of digital payments.,

The digital payments arm also contributed 35.7% of orders placed to Jumia in the quarter, as against 34.1% in Q3 2020.

From the report, we saw that Jumia is expanding JumiaPay services to a new set of customers, outside of its core e-commerce market. For one, Nigerian users can book bus tickets through the app while users in Egypt (especially students) can pay tuition fees online.

Signs of profitability are still far from the e-commerce company. Perhaps Diversification of JumiaPay – what will happen Definitely To increase its numbers further – is a means to an end to achieve this.

compounding loss

But the road remains a long one for Jumia as losses have widened even more in the quarter. Jumia’s adjusted EBITDA and operating losses rose 94% and 93% year-over-year in Q3 2021 respectively $52.5 million and up to $64 million.

The major factors behind this huge increase in losses are due to the boom in the company’s sales and advertising, and technology departments., The company noted in the report that sales and advertising spend grew 228% year-over-year to reach $24.0 million, while technology and content spending grew 27% to $9.4 million.,

right now As of the previous quarter, huge gains in sales and advertising spend indicate that “the company has returned to its old way of executing aggressive advertising, which in the beginning Slow down during the pandemic,” as we wrote earlier.

The e-tailer ended Q3 2021 (ending September 30) with $583.6 million ($185 million in cash and cash equivalents); This was $637.7 million in Q2 2021 and $399 million of financial assets). at the opening bell, Shares of Jumia were trading at $17.20, down 7.13%.

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