Significant Surge in Share Price
Jumia’s stock has experienced a remarkable 55% surge in the past five days, indicating growing investor confidence in the e-commerce company. The share price closed at $12.08 on Friday, up from $8.46 on July 8th, boosting its market capitalization to $1.32 billion.
A Turnaround for the Pan-African Retailer
This rally marks a significant shift in fortunes for the Pan-African retailer, which has faced a turbulent journey since its listing on the New York Stock Exchange in April 2019. Despite reaching a record high of $62.4 in February 2021 during the meme stock frenzy, Jumia has since lost over 70% of its market value.
Restructuring Under New Leadership
Following a series of disappointing performances and an inability to control costs, Jumia’s board replaced its long-standing co-CEOs in late 2022. Francis Dufay, formerly the CEO of Jumia Ivory Coast, took the helm and initiated a drastic restructuring of the business.
Drastic Measures to Improve Performance
Under Dufay’s leadership, Jumia has implemented significant changes over the past 18 months. These include laying off 43% of its workforce, scaling back operations in underperforming markets, and shutting down its food delivery business. Additionally, the management team based in the United Arab Emirates has been reduced, with several members returning to work from offices on the African continent.
Positive Impact on Financial Performance
These changes are starting to bear fruit. In Q1 2024, Jumia, which has yet to achieve profitability, managed to reduce its operating losses by 71%. Despite currency devaluation and macroeconomic challenges in key markets like Nigeria, revenue grew by 18.5%. Salary and administrative expenses also saw a 37% decrease compared to the same period last year.
Wall Street Takes Notice
These improvements have caught the attention of Wall Street analysts, with some recommending Jumia shares to their investors. The company’s share price has soared by 252.3% since the start of the year as it repositions itself for growth, particularly in North Africa.
Shift to Third-Party Sellers
Jumia is increasingly relying on third-party merchants, who now account for over 52% of sales on the platform in the first quarter. This strategic shift, initiated a few years ago, is helping to reduce costs and increase alternative platform revenue through commissions.
New Challenges and Competition
While Jumia focuses on revamping its operations, it faces growing competition from social selling platforms like Instagram and TikTok, which are expanding their e-commerce capabilities. Additionally, Amazon, a global retail giant, is increasing its presence in Jumia’s key markets, and Prosus-backed Takealot is solidifying its position in South Africa.
Focus on Stabilization Before Growth
In a previous interview with TechCabal, Dufay stated his intention to prioritize stabilizing the business before pursuing further growth in key markets. This approach reflects a cautious yet optimistic outlook for Jumia’s future as it navigates a dynamic and competitive e-commerce landscape.