Share sell-offs continued today in the wake of public companies’ earnings reports, proving especially significant amongst firms that benefited from the pandemic.
While new and established public companies in market categories like software, fintech, gaming and social media witnessed significant declines in recent weeks amidst rising interest rates, growth-oriented e-commerce companies like Jumia are not exactly proving themselves exempt from the larger rout.
Shares of the Africa-focused but U.S.-headquartered e-commerce company fell 32% in November after it posted an unconvincing third-quarter earnings report. Its share price, trading at $7.92 before the opening bell, fell 4% further despite posting improved fourth-quarter earnings today.
Gross merchandise volume (GMV) at Jumia in the fourth quarter grew 20% year-over-year to $330 million, while revenue grew to $62.0 million, up 26% over the same time frame. Quarterly active users and orders rose 29% and 40% to 3.8 million and 11.3 million year-over-year, respectively.
The metrics improved thanks to Jumia’s Q2 2021 decision to push frequent purchases of fast-moving consumer goods (FCMGs) rather than larger-ticket electronics and appliances, and increased in sales and marketing spend.
Sales and advertising expenses at Jumia grew 159% year-over-year in the final quarter of 2021, a significant slowdown from the previous quarter, which posted a staggering 228% expansion in the expense category.
Jumia’s marketplace revenue fell 1%, declining to $32.4 million in the fourth quarter of 2021.
Turning to the bottom line, Jumia’s adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) loss was $70 million in Q4 2021. That's a 107% year-over-year increase. What drove the rising adjusted loss? Gross profit only advanced 2%, which didn't square well in accounting terms with the aforementioned boost to Jumia's sales and marketing spend.
The company’s fintech arm, Jumia Pay, saw its total payment volume (TPV) grow by 29% year-over-year to $90.5 million in Q4 2021. Jumia also said its transactions reached 3.9 million, expanding 46% year-over-year. The final quarter of 2021 was the company’s fastest in terms of growth for nearly two years.
Jumia shipped 3.3 million packages for 996 partners via its logistics arm in Q4 2021. It sent 2.9 million packages for 766 clients the previous quarter. Altogether, Jumia got 8.3 million packages in the hands of 1,489 clients throughout last year, generating a revenue of over $3 million.
In its guidance, Jumia said it plans to upgrade its logistics capacity, which will cost between $15 million to $25 million this year.
The company also expects continued year-over-year GMV growth, spending up to $55 million in sales and advertising in the first half of 2022. That works out to an anticipated EBITDA loss of not more than $220 million this year, an increase from the $196 million adjusted loss it recorded in 2021.
Jumia finished 2021 with $512.8 million ($117.1 million of cash and cash equivalents and $395.7 million of term deposits and other financial assets). While there are a number positives from Jumia’s fourth-quarter performance, it appears Jumia’s long-term strategy — one which is investing hard in sales and expenses while banking on FMCG goods to cover ground — isn’t strong enough for its investors yet.