“You know what I’ve noticed? Nobody panics when things go ‘according to plan’. Even if the plan is horrifying!” sneers The Joker in Christopher Nolan’s The Dark Knight (2008).
Was Sacha Poignnonec, co-CEO of Jumia, betting on the same warped logic when he told Wall Street analysts on August 10: “The results of our clear strategy and consistent execution are coming nicely together”?
The French executive, who a decade ago co-founded Jumia with his fellow McKinsey and HEC alumnus Jérémy Hodara, had just announced to Wall Street that – after burning through $640m in negative earnings before interest, taxes, depreciation, and amortization (EBITDA) between 2019 and 2021 – the company expected another $200m EBITDA loss this year.
Past the peak?
“We believe that we have turned the corner and are past the peak of adjusted EBITDA losses that was reached in Q4 of last year in 2021,” insisted Poignonnec. In other words: all was still going ‘according to plan’.
It seems like the memo didn’t reach the Supervisory Board of the company.
On November 7, it announced the departure of the two co-CEOs and the appointment as interim boss of Francis Dufay, who had been head of Jumia’s subsidiary in Côte d’Ivoire for the last eight years.
Blood in the water
Wall Street’s watchers and investors could see blood in the water for months now.
In the 10 August earnings call with investors, three veteran analysts of the New York financial market – Aaron Kessler (of Raymond James), Lamont Williams (Stifel Financial Corp) and Catherine O’Neill (Citi) – pressed Jumia’s CEOs on specific data about the key company and market elements.
These included: the future impact of the company on the gross margin of various subsidies and incentives to buyers and sellers, the effect of the macroeconomic environment (growth, inflation, currency depreciation) on sales, the soundness of the marketing cost reduction strategy and how much revenue could be expected from opening Jumia Pay – one of the company’s vaunted new brainwave – services to third-party clients.
On all these points, Jumia’s management remained as optimistic as it was evasive. They resorted instead to their own version of Wall Street Speak.
New environment
Poignonnec went as far as suggesting that, being an old hand in African Markets, Jumia could navigate easily the unprecedented new macroeconomic environment.
“We have sometimes done better than other channels in periods of hyperinflation or increased consumer price sensitivity because, at the end of the day, we have a lot of competitive advantages to appeal to the consumers,” he said.
Meanwhile, Jérémy Hodara – incredibly – took comfort in the number of views of Jumia’s anniversary videos campaign, which reached “a record of 116 million, up 55% year over year”.
“This demonstrates our thorough understanding of what resonates with customers,” trumpeted the French businessperson.
While all that was going on, the stock was vegetating around $5, compared to more than $40 during its first days of trading in New York in April 2019 and far from the $65 peak it reached in January 2021.
Patient investors
Investors were still called upon to be patient, while the two managers were racking in nearly €4m each per year (including €400,000 in fixed salary, the rest in various short- and long-term compensations).
Sure, the analysts at the financial platform Simply Wall St. were alarmed that “Jumia Technologies’ cash burn of $254m [in 2021] is about 51% of its $494m market capitalisation” and anticipated “painful fundraising” efforts in coming quarters.
The founders were eager to reassure the markets: hadn’t Jumia strengthened its balance sheet by “raising $570m in 2021 and 2020”?
In August, Jumia’s bosses assured investors that they were looking forward “to a great second half of the year”.
Instead, they and several senior executives of the group, particularly those based in Dubai, will see the year-end from the sidelines.
An Ivorian at the head
Not everyone mourned the fall of the two co-founders of Jumia, who have been criticised for years for “usurping” the label “Made in Africa” for a company registered in Germany with the top management based in the Emirates.
“The two co-founders should have been fired a long time ago,” comments a European investor in African tech, pointing to the losses recorded in the second quarter of this year.
While the sales volume between April and June 2022 is up 21% year-on-year, the operating loss has worsened by 37.4%.
We have sometimes done better than other channels in periods of hyperinflation … because, at the end of the day, we have a lot of competitive advantages.”
“They need to hire a top management team that really knows Africa and that is also based there rather than in Dubai. And they should start worrying about aligning management’s interests with those of investors.
“Can anyone explain how millions of dollars of annual compensation were given to the top management even though none of the objectives set for the company is achieved?” this investor says.
Whether or not Jumia’s supervisory board shares this rather harsh judgement on the former management team, looking at the new priorities announced on November 7, one senses the main errors that should, in the eyes of the shareholders, be corrected.
They need to hire a top management team that really knows Africa and that is also based there….”
The choice as interim CEO of Francis Dufay, a naturalised Ivorian who has been based on the continent for years, unlike the co-founders and a large part of the staff, illustrates the board’s promise to “focus on locating leaders and decision centres closer to consumers and sellers in Africa”.
A track record of success
The group particularly emphasised the practical experience of Dufay, who has “a track record of successfully scaling e-commerce operations in Africa with a strong focus on profitability”.
“We want to bring more focus to the core e-commerce business as part of a more simplified and efficient organisation with a clearer path to profitability,” says Jonathan Klein, a former CEO of Getty Images, who chairs Jumia’s supervisory board.
At the same time, the promotion of Antoine Maillet-Mezeray from CFO to executive vice president in charge of finance as well as operations illustrates the renewed insistence on “reducing operating losses” and on “greater cost discipline”.
Maillet-Mezeray is among the most experienced executives at Jumia, which he joined in 2016 after more than 20 years in audit and financial control jobs.
Already, Dufay and Maillet-Mezeray are working on “a global plan to bring more focus to the business and improve its execution”.
For now, Wall Street is poised in a wait-and-see attitude. In the wake of the announcement of the staff changes, the stock has regained a bit of strength, but it is still hovering below $5, one of the lowest levels since 2020.
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