Jumia’s second-quarter losses widen by 60%, grapples with dubious sales
Jumia Technologies’ losses have widened to about 60% as the company struggles with improper transactions at the Africa-focused online retailer’s Nigeria business that amounted to as much as 4% of first-quarter sales.
Jumia said second-quarter operating losses widened by 60% to 66.7 million euros ($74 million), mainly due to an increase in costs related to the vesting of share options following the IPO.
Recall that three months ago, there were instances of wrongdoing backed up with warnings from short sellers Citron in a report, which brought an abrupt end to a share-price rally following Jumia’s initial public offering in New York the previous month.
According to the report, Jumia found cases where “improper orders were placed and subsequently cancelled.” These included deals made through a team of independent Nigerian sales consultants called J-Force. The transactions in question amounted to 2% of 2018 gross merchandise volume — a term for sales used in online retailing — rising to 4% in the first quarter of 2019.
“J-Force allows the company to interact directly with customers but “requires constant improvement,” the report quoted Jumia co-founder and Chief Executive Officer Sacha Poignonnec.
Meanwhile, the report of dubious sales practices comes after Citron called Jumia “an obvious fraud,” wiping out early gains from the IPO. The stock shed another 14% to $12.73 as of 12:39 p.m. in New York, dropping below the $14.50 listing price.
The “business model has severe vulnerabilities,” Tellimer Markets Inc analysts led by Nirgunan Tiruchelvam said in a note following the results. “The business is intensely cash-flow negative and we have concerns about its viability.”
Jumia has operations in 14 African countries and is seeking to take advantage of rising incomes and better technology on the continent. “The company’s target for profitability is late 2022, and the cash raised through the listing should take Jumia “close” to that,” Poignonnec said.
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