Between net profit and effort to increase stockholders’ wealth, a glimpse into Jumia Performance

L-R: EVP Marketplace/Chief Executive Officer, Jumia Nigeria, Massimiliano Spalazzi; Chairwoman Jumia Nigeria and Head Institutional Affairs Jumia Africa, Juliet Anammah; Co-founder and co-CEO Jumia Group, Jeremy Hodara and Media Relations, Jumia Group, Abdesslam Benzitouni

Waheed Alabede, an Economist writes from the US

As Jumia prepares to release its 2019 Quarter 4 and Full Year Earnings later today, it will be interesting what folks will be focusing on. Is it going to be net profit or Jumia’s effort to increase stockholders’ wealth?

Stockholders' wealth and net profit sound like the same parameter but not necessarily. A company could be taking on losses at the earlier stage of its operations with a future expansionary outlook meaning building wealth. That same company could be recording negative net profit as it is expanding. As you know, capital must be invested for expansion and it isn’t always profitable at the beginning for a startup company.

Chairperson of Jumia Nigeria, Juliet Anammah, on a visit to National Information Technology Development Agency (NITDA), Kashifu Inuwa Abdullahi, to seek for partnership on the area of job creation

An astute investor knows where the ship is heading and is usually in it for the long haul. Amazon investors who stuck with the company during the years of negative net profit are smiling to the banks today.

It is customary that when a business entity is in the growth phase, net profit will be impacted. As a matter of fact, some companies focus primarily on growth at the startup phase instead of net profit.

Let’s look at some of the numbers from Jumia’s performance in the first three quarters of 2019. The Gross Merchandise Revenue grew by almost 38.7% between 3rd quarter of 2018 and 3rd quarter of 2019.

Another amazing milestone in 2019 was the growth of Active Customers from 3.5 million in Q3 2018 to 5.5 million in Q3 2019. That is an amazing 57.1% growth rate. Most startups will kill for this high growth rate. Total orders increased by over 94% between 3rd quarter of 2018 and 3rd quarter of 2019. Active users placed orders on an average 3/4 times during the year. It means a good number of users are returning customers.

The Jumia performances highlighted here are a result of the company’s effort aimed at profitable in all the 11 markets it operates. The indicators are just a snippet of all the performance indicators that must be considered when analysing a company such as Jumia.

With the release of its annual report later today, we will be able to review all the performance indicators.

What will we be talking about later today when the full-year results are out?