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Jumia's renewed urgency
A.k.a it's make or break time
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Chipper Cash does a second round of layoffs
After months of electioneering, Nigeria enters crunch time this week and on Saturday, millions of people will vote in the Presidential elections in what will surely be one of the most closely fought ballots in our history. The polls have been pretty interesting and it’ll be great to see if the voter turnout increases as is being widely predicted. Voting will happen against a backdrop of a currency crisis, persistent queues at the fuel station, and 21% inflation. Whoever wins will deal with some of the worst economic conditions Nigeria has experienced in decades; it’s easy to predict that the job will require a lot of unpopular decisions. Anyway you slice and dice it, the only thing everyone will talk about this week is the Presidential election.
It might explain why it was easy to miss the news that payments startup, Chipper Cash fired more than 100 employees. The layoff affected all departments across the company, with the company reportedly shuttering its crypto team. In December, the company also laid off around 50 employees. On both occasions, there was no word from the company explaining the layoffs, so we’re going to file this under the now familiar reason most companies give, “worsening macroeconomic conditions.”
One interesting question is whether Chipper Cash will (or has raised money this year). A Financial Times report in December 2022 showed a steep drop in the company’s valuation from $2 billion to $1.25 billion. It’s hardly surprising given the state of play of tech stocks, and we’ve seen similar reports that claim Flutterwave has also seen a slash in its valuation. There’s no doubt that barring a miracle, both companies will have a down round this year if they raise money.
A lot is happening at Jumia
There’s a sense of urgency at Jumia in the past two years that has been missing for maybe the last six years before then. After being appointed interim CEO in late 2022, Francis Dufay now has the job permanently and the search for a CEO is over. The search for profitability, on the other hand, is still in full swing. In Jumia’s earnings call last week, it was difficult to miss the urgency of the mandate; the company’s management said on the call that Jumia has to break even. The company’s results left investors unimpressed with the stock price tumbling to around $3.65 after its earnings call.
The company’s adjusted EBITDA loss in 2022 was $207 million (a little less than its current liquidity position), and order volume dropped. Its target for 2023 is to bring down its losses to between $100-120 million, and this is critical to the company’s continued survival. What do you do when you’re looking to cut your losses in half? First, you reduce your headcount in Dubai (I’m still not sure why this ever existed in the first place) by 60%, reduce your advertising spend and eliminate job roles that are redundant.
900 employees were fired, and the company is narrowing its focus on the things that it knows. Say bye-bye to experiments like Jumia Prime and the logistics as a service business it opened, and bye-bye to food delivery in markets where it’s not making a lot of money. There will be a lot of control around how it spends money on promotions this year, and even with its focus on groceries, Jumia will increase the average basket size it promises free or same-day deliveries on.
The knotty puzzle to solve will be how to ensure growth while cutting down its spending. The total number of orders Jumia had in 2022 dropped to 9.9 million from 11.3 million in 2021 (sales and advertising expense dropped from $81.9m in 2021 to $75.9m in 2022). With a further reduction on the cards–it plans to spend $30-40m this year–it’ll be interesting to see if it can grow its number of orders.
That’s it for this week! Stay safe and here’s to a peaceful Presidential election. See you on Friday!